The inflation and rate cut picture has become much more complicated since the start of the year. Investors came in anticipating relief from several cuts, but the debate has turned towards two, one, or perhaps no cuts at all. Even if those few cuts arrive, high rates and stubborn inflation are cutting into investor wallets. That speaks to the benefits of current income, especially via an active, adaptable equity ETF.
See more: Eye Active Investing as Market Leaders Diverge
Who might want that current income most? For example, investors at or nearing retirement may want to get exposure to dividend-paying stocks or strategies. The one-two punch of inflation and high rates eating into living expenses may push investors to seek income from sources less tied to uncertain interest rates, such as equities.
That’s where an active strategy like TEQI comes in. TEQI, the T. Rowe Price Equity Income ETF, actively invests for a 54 basis point (bps) fee. The ETF looks for global large-cap firms the issuer believes to be undervalued. It assesses firms based on price-to-earnings ratios, dividend yields, and low prices relative to fundamentals.
TEQI has done well over the last three years. The strategy has outperformed both its ETF Database Category and Factset Segment averages. The ETF returned an annualized average of 8.82% in that time and has averaged 16.30% annually since its inception (as of March 31).
Intriguingly, that speaks to the advantages of an active approach to current income. A passive strategy that seeks out high dividend-paying stocks would likely not offer the same adaptability or fundamental focus. TEQI presents the opportunity for equity returns on top of that current income via dividend distributions.
Such a combination can appeal compared to fixed income yields, for example, as TEQI combines that income with stock market exposure. Taken together, for those investors looking for current income, the strategy stands out as an option.
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