The Takeaway
The Morningstar Developed Markets Large Cap Dividend Leaders Screened Select Index offers a time-tested approach to dividend investing, balancing yield with dividend durability and environmental, social, and governance-focused characteristics. It reflects an all-weather strategy for income investing.
This index has tended to hold up better than its parent benchmark during market downturns. Its screens for dividend sustainability help mitigate exposure to stocks that are more likely to cut their dividends.
While sector weights can shift over time, they contributed to the index’s strong performance relative to its parent benchmark over the trailing five years through September 2025. Favorable stock exposure within the financial services sector also helped.
The Morningstar Developed Markets Large Cap Dividend Leaders Screened Select Index targets high-dividend-yielding stocks, while screening for dividend consistency, sustainability, severe ESG risk and controversies, and product involvement.
This represents a more risk-aware approach than considering yield in isolation. While broadly diversified dividend income strategies are often more defensive than the market, aggressively chasing yield can court risk. High dividend yields can result from declining share prices, owing to weak or deteriorating fundamentals that may lead to further price declines or unsustainably high payout ratios, which could precede dividend cuts. Other high-yielding stocks may be involved in controversies or controversial lines of business. Dividend sustainability screens and prudent portfolio construction can help reduce risk.
The index’s dividend payout and dividend growth screens help mitigate exposure to dividend payers that may not be able to sustain their dividend payments. These screens also helped reduce the index’s volatility and market sensitivity. For reference, Exhibit 1 includes a version of the index without the dividend growth and payout screens.
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