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Dividend Hikes Are Back: Buy These ETFs

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Dividend payments were mostly stalled in the year 2020 as the coronavirus-led corporate cash crunch led to the announcement of dividend cuts. In April 2020, two dozen companies in the S&P 500 cut or suspended their dividends. However, things are changing this year. In April 2021, about 33 companies in the S&P 500 announced dividend hikes. No companies announced a cut or suspension, per a CNBC article.

The CNBC article continues to note that 10 companies that had suspended dividends in 2020 announced the reestablishment of dividend payouts in April. Those companies are Ross Stores, TJX, HCA Health Care, Universal Health Services, Freeport McMoRan, Estee Lauder, Kimco Realty, Darden Restaurants, Weyerhauser and Marathon Oil. In fact, TJX, HCA Healthcare and Freeport McMoRan are paying higher dividends than what they paid before suspension.

Howard Silverblatt, senior index analyst from S&P Global Indices expects the overall dividend payout for the S&P 500 to increase 5% in 2021, per the CNBC article. That would take the total payout to about $515 billion, up from $483 billion in 2020. This makes it intriguing to bet on the dividend ETFs.

Investors should note that not all dividend stocks serve the same purpose. While the high-yield ones are known for offering a hefty current income, stocks with dividend growth point to quality investing — a pre-requisite to making money in this volatile environment. These companies — known as dividend aristocrats — are usually good for value investing and in demand when volatility flares up.

Against this backdrop, below we highlight a few dividend aristocrat ETFs that could be intriguing picks at the current level.

ETFs in Focus  

SPDR S&P Dividend ETF (SDY - Free Report)

The underlying S&P High Yield Dividend Aristocrats Index measures the performance of the highest dividend yielding S&P Composite 1500 Index constituents that have followed a managed-dividends policy of consistently increasing dividends every year for at least 20 consecutive years. The fund charges 35 bps in fees and yields 2.55% annually (read: 5 Dividend ETFs Hovering at Record High).

ProShares S&P 500 Dividend Aristocrats ETF (NOBL - Free Report)

The underlying S&P 500 Dividend Aristocrats Index targets companies that are currently members of the S&P 500, have increased dividend payments each year for at least 25 years, and meet certain market capitalization & liquidity requirements.The fund charges 35 bps in fees and yields 1.97% annually.

Siren DIVCON Leaders Dividend ETF (LEAD - Free Report)

The underlying Siren DIVCON Leaders Dividend Index capitalizes on the theory that, over time, companies that consistently grow their dividends tend to have investment returns above overall market returns and companies that do not grow their dividends tend to have investment returns below overall market returns. The fund charges 43 bps in fees and yields 0.77% annually.

O'shares FTSE US Quality Dividend ETF (OUSA - Free Report)

This one is a quality pick as the underlying index chooses stocks with strong balance sheets and profitability. The fund charges 48 bps in fees and yields 1.71% annually.

Invesco Dividend Achievers ETF (PFM - Free Report)

The underlying NASDAQ US Broad Dividend Achievers Index is designed to identify a diversified group of dividend-paying companies which have increased their annual dividend for 10 or more consecutive fiscal years. It charges 53 bps in fees and yields about 1.65% annually.

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