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Dividend ETFs may be the best investment you can make today. The iShares 20+ Year Treasury Bond ETF (NASDAQ:TLT), iShares Global Consumer Staples ETF (NYSEARCA:KXI), and iShares US Pharmaceuticals ETF (NYSEARCA:IHE) are worth considering first. These ETFs can help you ride through a near-term market crash by providing ballast while providing you with income to edge out inflation. You can rotate your gains into these ETFs for the short term, or you could hold them for the long run.
The latter gives you snowballing returns over a longer period, whereas the former will act as a reserve you can rely on if and when the stock market crashes. You can then rotate out of these ETFs and buy up beaten-down stocks.
Let’s take a look at each of them in detail.
iShares 20+ Year Treasury Bond ETF (TLT)
The iShares 20+ Year Treasury Bond ETF tracks the ICE U.S. Treasury 20+ Year Bond Index, which measures the performance of U.S. Treasury bonds with remaining maturities of 20 years or more. You get exposure to long-dated U.S. government debt through a single liquid ETF, and it’s unlikely to tumble during a recession. If anything, it should rise.
Government bonds with long maturities come with higher yields and set the standard for what is considered a “safe yield” for the rest of the market. These are backed by the U.S. government, so it’ll be the last domino to fall.
Moreover, the yield you get is very attractive now and is worth buying into before further interest rate cuts. TLT gets you a 3.97% dividend yield that is paid monthly. This yield is very sticky due to the 20-year-plus maturity on the underlying bonds. When the market tumbles and the Fed issues emergency interest rate cuts, long-term bonds will be among the only few safe assets to hold for a respectable yield.
As a result, they could spike significantly, just like they did in late 2008. TLT jumped from $93 to over $122 in a month back then before normalizing as the recession waned.
iShares Global Consumer Staples ETF (KXI)
The iShares Global Consumer Staples ETF tracks the S&P Global 1200 Consumer Staples (Sector) Capped Index. It is tracking an index that gives you exposure to stocks in the consumer staples sector from all around the world, including the U.S.
This is one of the best dividend ETFs to hold alongside bonds if you also want some upside along with the dividends and safety. KXI has a low beta and should bounce back just fine, even if it does tank in the near term. Consumer staples are inherently inelastic, as people do not cut back on necessities. This inelasticity is passed on to this ETF during tough times.
You get exposure to international stocks, which acts as another layer of safety. Stocks that trade abroad and are not dollar-denominated can appreciate if the U.S. dollar tanks during a recession.
The dollar has lost ~11% of its value against the Euro since the start of 2025. This is one reason why European stocks trading in the U.S. have performed so well.
KXI yields 2.38% with an expense ratio of 0.39%, or $39 per $10,000.
iShares US Pharmaceuticals ETF (IHE)
iShares US Pharmaceuticals ETF tracks the Dow Jones U.S. Select Pharmaceuticals Index. It is an under-appreciated way to beat the market during downturns, as most people focus on consumer staples, retail, and bonds.
The pharmaceutical market is also quite great if you go for bigger companies. Demand for medication is very inelastic and highly predictable once a brand establishes itself. You can also make the patent expiration risk negligible by buying into several big-name pharma companies, which is what the IHE ETF does.
The IHE ETF has ~48% of its exposure to Eli Lilly (NYSE:LLY) and Johnson & Johnson (NYSE:JNJ) at 25.7% and 22%, respectively. The rest is scattered throughout its 45 other holdings. LLY gives you the growth, with JNJ adding great ballast. Both can perform well in a downturn, as weight loss drugs have continued to gain popularity. IHE is up 26.7% year-to-date and has even outperformed the QQQ because of this.
You get a small dividend yield of 1.35%. The expense ratio is 0.38%, or $38 per $10,000.