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Vaccination & Economic Recovery to Boost These ETFs
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With COVID-19 vaccination taking momentum, the outlook for large U.S. companies returning capital to their shareholders via dividends and buybacks is brightening. Upbeat corporate earnings and the pandemic recovery have led to the buoyancy.
Last year, many large U.S. companies cut or suspended their dividends and cut back their share repurchases, if not stopping them. Areas like capital expenditures and mergers and acquisitions were also axed somewhat.
But things are now changing for the better. Goldman Sachs Portfolio Strategy Research, in a recent note, forecast that the S&P 500 companies will shell out $546 billion of dividends, up 5% from $520 billion in 2020, as quoted on a barrons.com article. Last year, S&P 500 dividends nudged up only 1% amid the pandemic.
One obstacle to large-cap dividend growth has been the large U.S. banks, which kept their dividends steady but suspended hikes and buybacks over the past year. But, the Goldman note said, “our banks analysts expect dividends to increase substantially starting” late this year following results from the latest round of stress tests, known formally as the Comprehensive Capital Analysis and Review, the article indicated, the article noted.
Goldman Sachs is now forecasting a 35% uptick in stock buybacks this year to $726 million, and a 5% boost next year to $762 million. The largest U.S. companies continue to make up for the major share of dividends. The top 10 S&P 500 payers last year made up about $119 billion of dividends, or 23% of the total. Such circumstances entail that various kinds of corporate actions gain steam in the coming days. Hence, investors can keep a close watch on the below-mentioned ETFs.
The underlying IQ Merger Arbitrage Index seeks to identify opportunities in companies whose equity securities trade in developed markets, including the United States, and those that are involved in announced mergers, acquisitions and other buyout-related transactions. The fund charges 77 bps in fees. The fund yields 2.30% annually.
The underlying Renaissance IPO Index is a portfolio of newly U.S.-listed initial public offerings of companies whose unseasoned equities are under-represented in core U.S. equity indices. IPOs that meet liquidity & operational screens are included in the index at the end of the fifth day of trading, or upon quarterly reviews, weighted by tradable float, capped at 10% and removed after two years. The fund charges 60 bps in fees.
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 2.53% annually (read: Dividend Hikes Are Back: Buy These ETFs).
The underlying NASDAQ US BuyBack Achievers Index comprises U.S. securities issued by corporations that have effected a net reduction in shares outstanding of 5% or more in the trailing 12 months. The fund charges 62 bps in fees and yields 1.12% annually (read: Buyback Regains Favor After 2020 Gloom: ETFs to Buy).
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Vaccination & Economic Recovery to Boost These ETFs
With COVID-19 vaccination taking momentum, the outlook for large U.S. companies returning capital to their shareholders via dividends and buybacks is brightening. Upbeat corporate earnings and the pandemic recovery have led to the buoyancy.
Last year, many large U.S. companies cut or suspended their dividends and cut back their share repurchases, if not stopping them. Areas like capital expenditures and mergers and acquisitions were also axed somewhat.
But things are now changing for the better. Goldman Sachs Portfolio Strategy Research, in a recent note, forecast that the S&P 500 companies will shell out $546 billion of dividends, up 5% from $520 billion in 2020, as quoted on a barrons.com article. Last year, S&P 500 dividends nudged up only 1% amid the pandemic.
One obstacle to large-cap dividend growth has been the large U.S. banks, which kept their dividends steady but suspended hikes and buybacks over the past year. But, the Goldman note said, “our banks analysts expect dividends to increase substantially starting” late this year following results from the latest round of stress tests, known formally as the Comprehensive Capital Analysis and Review, the article indicated, the article noted.
Goldman Sachs is now forecasting a 35% uptick in stock buybacks this year to $726 million, and a 5% boost next year to $762 million. The largest U.S. companies continue to make up for the major share of dividends. The top 10 S&P 500 payers last year made up about $119 billion of dividends, or 23% of the total. Such circumstances entail that various kinds of corporate actions gain steam in the coming days. Hence, investors can keep a close watch on the below-mentioned ETFs.
ETFs in Focus
IQ Merger Arbitrage ETF (MNA - Free Report)
The underlying IQ Merger Arbitrage Index seeks to identify opportunities in companies whose equity securities trade in developed markets, including the United States, and those that are involved in announced mergers, acquisitions and other buyout-related transactions. The fund charges 77 bps in fees. The fund yields 2.30% annually.
Renaissance IPO ETF (IPO - Free Report)
The underlying Renaissance IPO Index is a portfolio of newly U.S.-listed initial public offerings of companies whose unseasoned equities are under-represented in core U.S. equity indices. IPOs that meet liquidity & operational screens are included in the index at the end of the fifth day of trading, or upon quarterly reviews, weighted by tradable float, capped at 10% and removed after two years. The fund charges 60 bps in fees.
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 2.53% annually (read: Dividend Hikes Are Back: Buy These ETFs).
Invesco BuyBack Achievers ETF (PKW - Free Report)
The underlying NASDAQ US BuyBack Achievers Index comprises U.S. securities issued by corporations that have effected a net reduction in shares outstanding of 5% or more in the trailing 12 months. The fund charges 62 bps in fees and yields 1.12% annually (read: Buyback Regains Favor After 2020 Gloom: ETFs to Buy).
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>