By Patturaja Murugaboopathy

(Reuters) -Global funds that invest in dividend-paying stocks are drawing strong flows this year, following two years of tepid investor demand, as investors seek assets with a stable income while they navigate geopolitical and economic tensions.

Higher dividend-yielding stocks have become popular as the technology sector, which was last year's standout performer, lags behind dividend-heavy sectors such as utilities and energy in 2025.

Global dividend-focused exchange-traded funds attracted $23.7 billion in inflows in the first half of 2025, the most in three years, according to Lipper data from LSEG.

"Consistent dividend growth signals a company's managers are disciplined at capital allocation and confident about future business prospects," said Steve Watson, an equity portfolio manager at Capital Group.

"With tariff negotiations likely to linger for months, dividend growers could provide portfolios with a measure of stability when markets become volatile."

Sector-wise, energy led the way with a global dividend yield of 4.75%, followed by real estate at 3.7%, utilities at 3.3%, and financials at 3%, according to LSEG data.

By region, Europe had the highest dividend yield of 3%, while Asia-Pacific's dividend yield was 2.6% and the U.S. lagged with an average dividend yield of 1.4%.

"With policymakers widely expected to trim rates later in the year, the bond side of the ledger could see coupons ratchet lower, while a broad swath of companies still have room to hold or even lift their dividends," said Chad Harmer, chief investment officer at Harmer Wealth Management. 

"If that script plays out, the income gap should tilt further in equities' favour."

The iShares International Select Dividend ETF has gained nearly 26% this year, while the Xtrackers MSCI EAFE High Dividend Yield Equity ETF and the Schwab International Dividend Equity ETF are up around 18% each. 

In comparison, the MSCI World Index has returned 8.5% year-to-date.