Dividends have become a popular theme over the last several months, adding current income to portfolios beset by volatility. What role can dividends play for the rest of the year, then? With active ETF investing picking up steam, investors may want to consider the benefits of combining the two themes in active dividends ETFs. The T. Rowe Price Equity Income ETF (TEQI ) may stand out in that group, too, hitting some potent milestones this summer.
Why dividends? Current income from equities offers ballast for investments facing rising rates, inflation, and the lurking prospect of a recession. They also offer other key information about firms’ outlooks. Healthy dividends offer investors a read on the health of a given company, with the firm’s ability to provide dividends intimately related to its prospects.
Making The Case for TEQI
That helps an active dividends ETF like TEQI, which invests in large-cap stocks with a strong track record of paying dividends or ones that are believed to be undervalued. TEQI’s managers look at factors including low price-to-earnings ratios, strong dividends, and low stock prices relative to fundamentals. Healthy, high dividends can help build the case for an undervalued company that may be doing better than its stock price actually shows.
TEQI’s case, meanwhile, doesn’t just benefit from its active dividends emphasis, either. The ETF recently hit $100 million in ETF AUM, according to VettaFi, thanks in part to price influence for its holdings. What’s more, TEQI is also approaching its three-year ETF milestone, traditionally considered the time when a strategy has a long enough track record to merit a good, long look. Those two milestones combine to make TEQI a strategy worth adding to a shortlist for the rest of 2023.
TEQI charges 54 basis points for its approach. The strategy currently offers a 2.45% annual dividend yield, returning 1.1% over the last month, according to VettaFi.
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