The Best Dividend ETFs for UK Investors in 2025

Ruby Layram 22nd Apr 2025 No Comments

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Dividend ETFS are a great way to build a passive income portfolio in 2025. These exchange-traded funds allow you to invest in a basket of dividend-paying stocks, without needing to pick out individual companies.

Just like investing in regular dividend stocks, dividend ETFs issue regular payouts to investors, resulting in a steady stream of income overtime.

In this post, we will take a look at some of the top-performing dividend ETFs as of April 2025.

1. Vanguard FTSE All-World High Dividend Yield UCITS ETF (VHYL)

Dividend Yield: Approximately 3.05%

Expense Ratio: 0.29%

If you’re looking to earn steady income from your investments without putting all your eggs in one country’s basket, Vanguard FTSE All-World High Dividend Yield UCITS ETF (VHYL) is a solid contender.

This ETF gives you instant access to a well-diversified mix of large and mid-sized companies from around the world- from powerhouse firms in the US and Europe to emerging market giants with serious growth potential.

This ETF focuses specifically on those with a strong track record of paying above-average dividends, which means you’re investing in businesses that reward their shareholders regularly.

It’s particularly popular with investors who want global exposure and income without having to pick individual stocks.

Plus, because it holds hundreds of companies from different regions and sectors, it helps spread your risk, making it a smart long-term option for building wealth and generating passive income.

2. iShares UK Dividend UCITS ETF (IUKD)

Year-to-Date Return: 5.61% (as of April 17, 2025)

This ETF zooms in on some of the highest dividend-paying stocks in the UK. Think big names in utilities, consumer goods, and financial services that have a history of rewarding shareholders with generous payouts.

Rather than casting a global net, IUKD keeps it local.

It’s designed for investors who want to harness the power of the UK’s dividend-heavy market, which historically boasts one of the highest yields in developed economies.

Whether you’re aiming to supplement your income or reinvest dividends for long-term growth, IUKD delivers a steady stream of potential returns straight from the heart of the British economy.

It’s especially appealing if you believe in the resilience of UK businesses and want to benefit from their regular profits without picking individual stocks.

Read: How to invest in the UK stock market

3. VanEck Morningstar Developed Markets Dividend Leaders UCITS ETF

1-Year Return: 17.71% (as of March 31, 2025)

The VanEck Morningstar Developed Markets Dividend Leaders UCITS ETF zeroes in on top-tier companies from developed markets that not only pay dividends but do so with clockwork consistency.

We’re talking about businesses with solid balance sheets, stable earnings, and a long-standing commitment to rewarding shareholders- rain or shine.

If you’re the kind of investor who values reliability over risk, this fund offers a well-curated basket of dividend aristocrats.

These companies aren’t just paying out now; they have a proven history of delivering payouts year after year- often increasing them even when the economy gets a bit rocky.

It’s an ideal pick for anyone who wants to build a portfolio around income and quality- whether you’re planning for retirement, topping up your ISA, or just love the idea of your money working harder in the background.

4. Franklin European Quality Dividend UCITS ETF

1-Year Return: 22.20% as of March 31, 2025

This ETF offers a front-row seat to some of Europe’s most financially sound, shareholder-friendly companies. It zeroes in on firms across the continent that not only offer attractive dividend yields but also show strong fundamentals.

From household names in Germany and France to lesser-known but powerful dividend-payers in the Nordics and beyond, this fund brings together a carefully selected mix of companies that are committed to sharing their profits.

Whether you’re building an income-focused portfolio or simply want to add a splash of European flavour to your investments, this ETF gives you targeted exposure to the best of Europe’s dividend landscape- all without having to pick individual stocks.

5. L&G Gold Mining UCITS ETF

Q1 2025 return: 38.22%

1-Year return: 58.91%

Expense ratio: 0.55%

This one’s a bit of a wildcard- and that’s exactly what makes it interesting.

While it’s not your typical dividend ETF, this fund focuses on gold mining companies, many of which are known for handing out chunky dividends thanks to strong cash flows (especially when gold prices are high!).

Think of it as a way to blend income with commodity exposure. You’re not just relying on banks and utility companies for your dividend cheques- you’re tapping into the profits of global miners digging up one of the world’s most sought-after assets.

It’s ideal for investors who want to diversify their income stream and aren’t afraid to explore beyond the usual suspects.

Plus, gold stocks can act as a hedge during inflationary periods or market volatility, adding an extra layer of potential protection to your portfolio.

How To Choose a Dividend ETF

Alright, so you’re keen to pocket some passive income through dividend ETFs, great move!

But with so many options on the market, how do you actually choose the right one for you?

1. Know Your Goals

Start by asking yourself: What am I hoping to get out of this?

Are you after regular income?
Are you looking to grow your capital while getting a bit of income on the side?
Do you want exposure to the UK, global markets, or specific regions like Europe or the US?

Once you’re clear on your goals, it’ll be easier to spot an ETF that matches them.

2. Check the Dividend Yield (But Don’t Chase It)

It’s tempting to pick the ETF with the highest yield- after all, more income sounds better, right?

But hold on. A super high yield can sometimes be a red flag, especially if it’s the result of falling share prices or poor company fundamentals.

Look for a sustainable yield, something solid and consistent over time, rather than a number that looks good today but could vanish tomorrow.

3. Look Under the Hood

An ETF is only as good as the companies inside it. Check:

Which companies it holds
Which sectors are dominant (e.g., financials, energy, healthcare)
How diversified it is (globally, regionally, or sector-wise)

For example, a UK dividend ETF might be heavily tilted towards banks and oil companies. A global one might spread across tech, industrials, and consumer goods. Know what you’re buying into.

4. Understand the Index It Tracks

Every dividend ETF follows a specific index, like the FTSE UK Dividend+ Index or the S&P Global Dividend Aristocrats Index.

These indices all have different rules for what counts as a “good” dividend stock.

Some focus on high yield, others on dividend growth or consistency. It’s worth doing a quick check to see how the index works and whether it fits your strategy.

5. Keep an Eye on Fees

Dividend ETFs are generally cheap, but fees still matter. Look at the Ongoing Charges Figure (OCF) or Total Expense Ratio (TER). Over time, even a small difference in fees can nibble away at your returns.

Final Thoughts

Investing in dividend ETFs is a great way to build an income portfolio without needing to pick out individual stocks and shares.

After reading through our top picks for April 2025, I recommend doing some research of your own to determine which ETFs are the best fit for your investment strategy.

Once you have found an ETF, open an account with a leading UK investment platform to get started.

Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence. When investing your capital is at risk.

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