Is HDV Still the Best Dividend ETF for Passive Income in 2025?

In the evolving landscape of passive income strategies, the search for a dividend ETF that balances yield, cost efficiency, and diversification remains a perennial challenge. The iShares Core High Dividend ETF (HDV) has long been a favorite among income-focused investors, but with 2025 bringing new market dynamics and competitive alternatives, it is worth reevaluating whether HDV still holds the crown—or if rivals like the Schwab U.S. Dividend Equity ETF (SCHD), Vanguard High Dividend Yield ETF (VYM), and SPDR Portfolio S&P 500 High Dividend ETF (SPYD) offer superior value.

HDV's Strengths: Yield, Cost, and Blue-Chip Exposure

HDV's appeal lies in its 3.7% dividend yield, which, while not the highest in its category, is bolstered by its focus on large-cap U.S. companies with a track record of consistent payouts. The fund's 0.08% expense ratio is competitive, especially for a non-diversified ETF, and its top holdings—such as healthcare and consumer sector giants—offer exposure to industries with durable demand. Year-to-date (YTD) returns of 2.02% (as of July 2025) outperform the FactSet Segment Average of 0.43%, suggesting resilience in a market where high-dividend stocks often lag during growth-driven cycles.

However, HDV's concentrated portfolio is a double-edged sword. The top 10 holdings account for 54.79% of assets, and the top 15 holdings represent 67.21%. This weighting increases the risk of underperformance if key holdings falter, particularly in a sector like healthcare, which is susceptible to regulatory and pricing pressures. For investors seeking diversification, this top-heavy structure may be a red flag.

Competitors: SCHD, VYM, and SPYD in the Spotlight

The Schwab U.S. Dividend Equity ETF (SCHD) offers a compelling alternative with a 3.54% yield and a 0.06% expense ratio, making it one of the lowest-cost options in the space. However, SCHD's YTD return of -1.16% lags behind HDV, and its portfolio—while slightly less concentrated (top 10 holdings at 40.98%)—still leans heavily on real estate and utilities. Its geographic focus is almost entirely U.S.-centric (98.51% of assets), which may limit exposure to global opportunities.

The Vanguard High Dividend Yield ETF (VYM) shines with a 6.51% YTD return and a 0.06% expense ratio, outperforming both HDV and SPYD in 2025. However, its 2.63% yield pales in comparison to SPYD's 4.46%, which is the highest among the four. SPYD's concentrated portfolio (top 10 holdings at 40.98%) and higher exposure to real estate and utilities align it closely with HDV in risk profile, but its lower yield and mixed performance (1.76% YTD) make it a less attractive option for income-focused investors.

Strategic Considerations for Income Investors

For investors prioritizing diversification, SCHD's slightly broader sector allocation and lower concentration in top holdings may be preferable. Yet its negative YTD return raises questions about its suitability in a rising rate environment. VYM's strong performance and low cost make it a robust option, but its modest yield may fall short for those seeking aggressive income. SPYD's high yield is enticing, but its underperformance and sector concentration could erode long-term value.

HDV, meanwhile, strikes a middle ground. Its 3.7% yield and 0.08% expense ratio align with the needs of passive income seekers, while its blue-chip holdings offer stability. However, the fund's top-heavy weighting necessitates careful portfolio integration to avoid overexposure to healthcare and consumer sectors. Diversifying across HDV, VYM, and SCHD could mitigate sector-specific risks while balancing yield and growth potential.

Final Recommendation

In 2025, HDV remains a strong contender for investors seeking a blend of yield, cost efficiency, and sector-specific stability. Its outperformance in YTD returns and consistent dividend history justify its place in a passive income strategy. However, the fund's concentration risk cannot be ignored. A strategic approach would involve pairing HDV with more diversified alternatives like VYM or SCHD to balance sector exposure while maintaining a competitive yield. For those prioritizing income above all else, SPYD's high yield may be appealing, but its underperformance and volatility warrant caution.

Ultimately, the best dividend ETF for passive income in 2025 will depend on an investor's risk tolerance, diversification needs, and income goals. HDV's blend of proven performance and cost efficiency makes it a top choice—but not the only one. A well-constructed portfolio may benefit from leveraging the strengths of multiple ETFs to navigate the uncertainties of a shifting market.