Which Stock Funds Provide Inflation-Beating Yields?

Equity-income funds hope to provide investors with both equity appreciation and income, but many are falling short on both those goals right now.

Investing is about balancing trade-offs. Pocketing dividend income comes at the expense of long-term capital appreciation. Imagine your forward-thinking parents saw the passive revolution coming and invested $100,000 in the Vanguard 500 Index at its August 1976 inception and still hold it today. If they pocketed every dividend while still reinvesting any capital gains, they would have earned more than $1.1 million in dividends over that nearly 50-year span, equating to a roughly 5.2% annualized yield on the initial investment. But, due to not reinvesting the dividends, their equity would be worth just over $6.5 million, and their total value of $7.6 million would be a far cry from the nearly $23.0 million that would have been had if the dividends were instead always reinvested back into the fund.

For some investors, that trade-off may be worth it, as they may primarily value the yield and any appreciation is just a cherry on top. But for the income support to be meaningful, it should at least match inflation. Yet, as of December 2025, the Gold-rated Vanguard 500 Index VFINX, for instance, yielded roughly 1.6% from its 12-month ago price, far below the 2.4% inflation rate. Over the trailing five years through January 2026, its 1.6% annualized yield was far less than the 4.5% annualized inflation over that stretch.

Gold-rated Vanguard Dividend Appreciation Index VDADX, like many dividend-focused strategies, is a value-leaning fund in the large-blend Morningstar Category. An investor who bought it at the start of 2021 and kept the dividends would’ve earned a roughly 2.1% yield through February 2026, far less than the 4.5% annualized inflation over that period. Even if the investor reinvested the dividends, collecting no income, he or she would have still trailed the S&P 500 by more than 2.0% annualized.

Schwab U.S. Dividend Equity ETF SCHD is Gold-rated and one of the few funds providing inflation-topping yields right now. An investor who bought the exchange-traded fund in March 2025 and pocketed the dividends could have earned about a 4.6% yield in the ensuing year, more than inflation eroded away in that time. On top of that, because the fund declined in value in early 2025, taking the dividends as cash acted as ballast and did not cost fundholders much in terms of total return. Overall, an investor would have beaten the S&P 500 in that time, even while taking the dividends as a cash yield.

International offerings like Vanguard International High Dividend Yield VIHAX provide a bit better yields, thanks to lower equity valuations outside of the US. It yielded 4.4% over the past five years if investors kept all dividends, which slightly lagged inflation, but not to the same extent as most US equity funds.

Of course, over longer periods, the lack of dividend reinvestment can create far greater foregone returns. Investors looking solely for yield right now can use equities as income diversifiers, but for most of your income portfolio, you are better off looking outside of equities until they start providing consistent inflation-matching yields.