Experienced investors know that dividend exchange traded funds often emphasize one of two methodologies — focusing on yield or emphasizing payout growth.
However, some stocks that are consistent dividend growers also sport above-average yields, while some in the noteworthy yield camp are also reliable boosters of payouts. With that in mind along with the point that dividend growth is poised to accelerate this year, an exchange traded fund such as the Franklin U.S. Low Volatility High Dividend Index ETF (LVHD ) becomes all the more relevant.
As its name implies, part of LVHD’s area of emphasis is stocks with high dividends. As noted above, some of those names are also steady dividend growers — a meaningful trait when S&P 500 payout growth is expected to set fresh records this year. By some estimates, S&P 500 members firms are forecast to pay $550 billion in dividends this year. The bulk of LVHD’s 99 holdings are S&P 500 components.
“The current working view for S&P 500 dividends continues to be positive, with growth expected, even as the economy slows and interest rates rise,” said S&P Global’s Howard Silverblatt in a recent note.
Obviously, that’s positive commentary on dividend growth, but upon first glance, an investor may perceive LVHD as a volatility-reducing, high-payout ETF. That’s true, but upon further examination, the ETF is home to plenty of names with enviable histories of boosting payouts.
For example, companies such as Dow components McDonald’s (NYSE:MCD) and Coca-Cola, as well as General Mills (NYSE:GIS), Kimberly Clark (NYSE:KMB), and PepsiCo (NASDAQ:PEP) have dividend increase streaks measurable in decades. All of those names are LVHD member firms.
LVHD is also home to some companies that increased payouts in at least four of the past five years and currently have yields in excess of 10-year Treasuries — a potentially compelling trait at a time of stress in the bond market.
That group includes American Electric Power (NYSE:AEP), casino landlord VICI Properties (NYSE:VICI), and DTE Energy (NYSE:DTE).
Fresh off its acquisition of rival MGM Growth Properties, VICI was added to the S&P 500 last month. The stock is the largest component in LVHD. The real estate investment trust (REIT) is the largest owner of gaming real estate in the U.S. and owns the property assets of well-known Las Vegas Strip integrated resorts, including Caesars Palace, Mandalay Bay, and the Venetian.
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