4 ETFs with dividends up to 7%
The energy sector is one of the strongest parts of the US market this year, and with it, dividend ETFs tied to oil, gas, and transport infrastructure are returning to investors' radar. But the offering is much more diverse than it seems at first glance. Three of the four funds discussed pay roughly 2.5% to 3%, while one reaches over 7%. The difference is not explained by portfolio quality, but by the fund’s different legal and tax structure. And that is precisely what needs to be understood before an investor decides based solely on yield.
Key points
A high dividend yield in energy often comes not from a better portfolio, but from a different fund tax structure.
A yield above 7% comes with up to twelve times the expense ratio of the cheapest sector funds.
Even a fund with a hundred positions isn’t diversified, because all react to a single factor: the price of oil.
This year, yields fell in all funds even though no one cut dividends. The culprit is the rise in share prices.
Why energy came back into play this year
The year 2026 put the energy sector in a role it hasn’t been in for a long time. After two years when capital flowed almost exclusively into tech stocks linked to artificial intelligence, a combination of a geopolitical shock and significantly higher oil prices turned investors’ attention. The closure of the Strait of Hormuz at the end of February shot the price of oil from a December low below $60 a barrel to above $120 at the end of April. A subsequent memorandum between the United States and Iran on June 18 calmed the market, and the price fell back below $70, but the calm didn’t last long. At the start of August, oil trades around $83 a barrel, and renewed tensions around the strait keep a geopolitical premium priced in.
For dividend investors, this environment has two faces. On one hand, energy companies generate above‑average cash flow and keep their payout ratios at conservative levels. On the other hand, the entire sector is tied to a commodity whose price managed to move within a range of more than one hundred percent in a single half‑year. This naturally also affects the behavior of funds investing in this sector.
The US Energy Information Administration (EIA) in its July forecast expects an average Brent price around $74 in the third quarter and a decline to $65 in 2027. The market is much more optimistic so far, and J.P. Morgan analysts work with an average of $86 in the third quarter and $78 at year‑end. The difference between these two scenarios is crucial for energy ETFs, because oil companies’ profits react non‑linearly to changes in the commodity price.
The following four funds cover the energy sector from four different angles and differ in cost, geographic scope, concentration, and legal structure.
Fund | Ticker | TER | Yield | AUM | Positions |
Energy Select Sector | 0.08% | 2.67% | $36 bn | 21 | |
Vanguard Energy | 0.09% | 2.77% | $11 bn | 111 | |
Alerian MLP | 1.01% | 7.31% | $12.2 bn | 14 | |
iShares Global Energy | 0.40% | 3.20% | $2.4 bn | 50 |