ETFdb Logo
ETFdb Logo
  • ETF Database
  • Channels
    • Active ETF
    • Beyond Basic Beta
    • China Insights
    • Climate Insights
    • Commodities
    • Core Strategies
    • Crypto
    • Direct Indexing
    • Disruptive Technology
    • Energy Infrastructure
    • ETF Building Blocks
    • ETF Education
    • ETF Strategist
    • Financial Literacy
    • Fixed Income
    • Gold/Silver/Critical Minerals
    • Innovative ETFs
    • Institutional Income Strategies
    • Leveraged & Inverse
    • Managed Futures
    • Market Insights
    • Modern Alpha
    • Multifactor
    • Night Effect
    • Portfolio Strategies
    • Responsible Investing
    • Retirement Income
    • Richard Bernstein Advisors
    • Tax Efficient Income
  • Tools
    • ETF Screener
    • ETF Country Exposure Tool
    • ETF Sector Tracker Tool
    • ETF Database Categories
    • Head-To-Head ETF Comparison Tool
    • ETF Stock Exposure Tool
    • ETF Issuer Fund Flows
    • Indexes
    • Mutual Fund To ETF Converter
  • Research
    • ETF Education
    • Equity Investing
    • Dividend ETFs
    • Leveraged ETFs
    • Inverse ETFs
    • Index Education
    • Index Insights
    • Top ETF Sectors
    • Top ETF Issuers
    • Top ETF Industries
  • Webcasts
  • Themes
    • AI ETFs
    • Blockchain ETFs
    • See all Thematic Investing ETF themes
    • ESG Investing
    • Marijuana ETFs
  • Multimedia
    • ETF 360 Video Series
    • ETF of the Week Podcast
    • ETF Prime Podcast
    • Video
  • Company
    • About VettaFi
    • Get VettaFi’ed
  • PRO
    • Pro Content
    • Pro Tools
    • Advanced
    • FAQ
    • Pricing
    • Free Sign Up
    • Login
  1. Active ETF Channel
  2. Dividend Growth Remains an All-Weather Strategy
Active ETF Channel
Share

Dividend Growth Remains an All-Weather Strategy

Tom LydonMay 17, 2023
2023-05-17

Not all investing styles offer resilience across a variety of market settings — hence the term “style." However, dividend growth is durable in an assortment of market conditions.

That positive attribute isn’t a guarantee of upside in bear markets. Still, dividend growth investing offers volatility-reducing properties, quality traits, and an avenue for investors to reduce dependence on slower-growth bonds as sources of income.

“Stocks with a history of dividend growth, on the other hand, could present a compelling investment opportunity in an uncertain environment. An allocation to companies that have sustainable and growing dividends may provide exposure to high-quality stocks and greater income over time, therefore buffering against market volatility and addressing the risk of rising rates to some extent,” according to S&P Global.

More Reasons to Consider Dividend Growth

Because growth stocks outperformed value for a decade prior to 2022, younger or new investors may not be aware that dividends reinvested represent a significant portion of a portfolio’s returns over time. That highlights the power of compounding, but it’s even more powerful when the payouts are growing. Additionally, corporations dedicated to increasing their dividends often exhibit other traits seasoned investors prioritize.

“Dividend growth stocks tend to be of higher quality than those of the broader market in terms of earnings quality and leverage. Quite simply, when a company is reliably able to boost its dividend for years or even decades, this may suggest it has a certain amount of financial strength and discipline,” added S&P Global.

One way of looking at the above is that not all dividend-paying equities are created equal. Those with high yields often seduce investors seeking large dividends, but owing to high leverage and low return on equity, among other dubious traits, those firms are also the most likely to cut or suspend distributions.

Additionally, dividend growers can function as cushions against volatility. In nearly every bear market spanning 1999 to 2022 — a period including the dot-com bubble bursting and the global financial crisis, broad baskets of dividend growth equities outperformed the market.

This style of investing offers another benefit: Resilience at times when interest rates rise. The reason for that is many dividend growth stocks and the related funds aren’t heavily allocated to rate-sensitive sectors such as real estate and utilities. Many payout growth funds lean into consumer staples, healthcare and, more recently, tech stocks, among other less rate-sensitive groups.

Investors looking for an actively managed payout growth strategy can consider the T. Rowe Price Dividend Growth ETF (TDVG B).

For more news, information, and analysis, visit our Active ETF Channel.


Content continues below advertisement

Loading Articles...
Our Sites
  • VettaFi
  • Advisor Perspectives
  • ETF Trends
Tools
  • ETF Screener
  • Mutual Fund to ETF Converter
  • Head-To-Head ETF Comparison
  • ETF Country Exposure Tool
  • ETF Stock Exposure Tool
  • ETF Database Pro
More Tools
  • Financial Advisor & RIA Center
Explore ETFs
  • ETF News
  • ETF Category Reports
  • Premium Articles
  • Alphabetical Listing of ETFs
  • Browse ETFs by ETF Database Category
  • Browse ETFs by Index
  • Browse ETFs by Issuer
  • Compare ETFs
Information
  • Contact Us
  • Terms of Use and Privacy Policy
  • © 2023 VettaFi LLC. All rights reserved.

Advertisement

Is Your Portfolio Positioned With Enough Global Exposure?

ETF Education Channel

How to Allocate Commodities in Portfolios

Tom LydonApr 26, 2022
2022-04-26

A long-running debate in asset allocation circles is how much of a portfolio an investor should...

Core Strategies Channel

Why ETFs Experience Limit Up/Down Protections

Karrie GordonMay 13, 2022
2022-05-13

In a digital age where information moves in milliseconds and millions of participants can transact...

}
X