Dividend stocks and the related exchange traded funds aren’t dealing with “bad” performances per se this year, but broadly speaking, the group is lagging the S&P 500.
That’s likely due in part to low or no payout mega-cap growth stocks powering the broader market higher. Many of the stocks with credible exposure to the artificial intelligence (AI) are either new dividend payers, feature small payouts or still haven’t embraced cash dividends. However, those aren’t knocks on the WisdomTree U.S. Quality Dividend Growth Fund (DGRW ).
Over the past three years, DGRW has been an impressive performer, outpacing the S&P 500 819 basis points while also beating some of its larger rivals in the dividend ETF category by even larger margins. Past performance isn’t a guarantee of future returns. However, DGRW could be poised for another year of solid returns in 2025. This is particularly true if market participants become jittery about the policy outlook on Capitol Hill.
Dividend Stocks Could Deliver in 2025
Forecasting market volatility can be tricky, but preparing for is easy. DGRW can be part of that solution for income investors. In fact, the ETF and dividend stocks could be worth evaluating today. Markets are emerging from a modest spell of uncertainty leading up to Election Day.
“In fact, historically the market has often outperformed following periods of above-average uncertainty, according to research by Denise Chisholm, director of quantitative market strategy for Fidelity,” noted the fund issuer.
DGRW’s quality mandate is important. It potentially shortens the odds of member firms boosting payouts while reducing investors’ exposure to payout offenders. Likewise, many DGRW holdings aren’t stretched valuation. The ETF’s roster is an impressive mix of firms that have long boosted payouts as well as those that are new to paying dividends.
DGRW could also be the beneficiary of support from the Federal Reserve should the central bank continue lowering interest rates. Fidelity fund manager Ramona Persaud points out that lower rates have historically helped dividend equities.
“Persaud notes that falling interest rates can provide a beneficial backdrop for dividend stocks, as a stock’s dividend yield may become relatively more competitive if yields on bonds decline. She adds that declining interest rates may support gains across a broader range of stocks—a significant change from much of the past 2 years, when market gains have been primarily concentrated among a handful of mega-cap growth shares,” noted the asset manager.
For more news, information, and analysis, visit the Modern Alpha Channel.
