TDIV June 2026 Reconstitution: A Tilt Toward European Financials

Twice a year, in June and December, the Morningstar® Developed Markets Large Cap Dividend Leaders Screened Select Index, the benchmark for VanEck Morningstar Developed Markets Dividend Leaders UCITS ETF (TDIV), is reconstituted and rebalanced. The index always holds 100 stocks, so additions and removals net out. This June, 26 names came in and 26 went out with the new portfolio reflecting changing geopolitical environment. Fully reconstitution summary is available here.

Sector and geographic shift

Financials climbed to about 44% of the portfolio, up from 35% before the rebalance. Energy dropped from around 19% to 11.5%, and healthcare also came down. Utilities and consumer staples barely moved.

GICS Sector Allocation

Source: Morningstar Direct, as of 22 June 2026. Open refers to the portfolio post rebalancing. Close refers to the portfolio pre rebalancing.

The geographic shift is toward Europe. The Americas, almost entirely the US, fell from about 31% to under 20%, while Europe went from 53% to 68%. The UK gained the most at the country level, France and Italy also rose, and Switzerland and the US both fell.

Regional Allocation

Source: Morningstar Direct, as of 22 June 2026. Open refers to the portfolio post rebalancing. Close refers to the portfolio pre rebalancing.

Why so many European banks and insurers came back

Of the 26 additions, 15 got in because they cleared the dividend consistency screen as Morningstar had no dividend-per-share figure for fiscal 2020 in the five-year lookback.

The reason is 2020. European bank regulators, the ECB especially, pushed lenders to hold back dividends during the pandemic, and most complied by suspending or cutting their payout that year. That left a hole in the five-year dividend history the methodology requires, which kept these names out of every rebalance since.

This June is the first one where the 2020 gap falls outside the five-year window, so a large group of banks and insurers with otherwise steady dividend records became eligible at the same time. The 15 are HSBC, Intesa Sanpaolo, BNP Paribas, UniCredit, Nordea, ING Groep, Engie, NatWest, Swedbank, Danske Bank, Crédit Agricole, DNB Bank, SEB, Svenska Handelsbanken, and BAWAG Group. They explain most of the jump in European financials.

Why energy names dropped out

Three energy names (ExxonMobil, ConocoPhillips, and Tenaris) were removed due to falling significantly below peers in the dividend yield ranking, meaning their yields no longer ranked high enough for the top 125. A fourth, Orlen, came out on ESG grounds.

The driver is price. Oil rallied hard from late February 2026 through the spring, as conflict in the Middle East and disruption around the Strait of Hormuz cut supply. Brent rose roughly 65% by the end of March and hit wartime highs into late April before easing¹. The reconstitution uses market data as of the last trading day of May, when energy share prices were still well above pre-war levels. Higher prices mean lower yields. For these names the yield fell far enough to drop them below the cutoff. Because the index ranks stocks by yield relative to their peers, a rally concentrated in one sector can move a whole cohort out at once.

A closer look at the top five²

One thing to keep in mind when reading the weights: this index is dividend-dollar weighted, not market-cap or yield weighted. A stock's weight comes from the total dollar value of dividends it pays, so the biggest holdings combine a high yield with a large dividend base.

Verizon Communications (5.78% yield) is the largest holding. Its size in the index comes from a high yield paired with a large dividend-dollar base, which is exactly what a dividend-weighted methodology rewards. The question for a US telecom carrying heavy debt is always payout durability, and Verizon's position at the top means the index is making a sizable bet on that dividend holding up.

HSBC (3.99% yield) is the clearest example of the story running through this reconstitution. It's one of the 15 names back in after the 2020 gap cleared the five-year window, and it enters straight into the second-largest slot. That single addition is a big part of why UK and financials exposure jumped.

Nestlé (3.90% yield) is the defensive anchor. Lower yield than the others in the top five, but a long record of steady, growing dividends in consumer staples. It's the kind of name that steadies a portfolio otherwise tilting hard toward cyclical financials this cycle.

Pfizer (6.57% yield) carries the highest yield of the five. In a dividend strategy a yield that high is worth reading closely as it can signal a generous payout or a depressed share price, and for Pfizer post-COVID it's probably a mixture of both.

TotalEnergies (4.52% yield) is the top energy name that survived the screen while Exxon and ConocoPhillips dropped out. It's a useful contrast: European majors held their index spots through the oil rally where several US names lost theirs on yield ranking, which shifts the fund's energy exposure toward Europe alongside everything else.