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Try Dividend Aristocrat ETFs to Fight Rising Delta Variant Woes
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The world’s largest economy is witnessing a surge in the number of new delta variant cases in 49 states. The United States recorded more than 63,600 new daily cases over the last week on average, per the Johns Hopkins University data and as mentioned in a CNN report. Moreover, the number highlights the gravity of the situation as the United States had seen a 2021 low of 11,299 daily new cases on Jun 22. In the past seven days, there was at least a 50% rise in cases in 36 states (as of Jul 29), according to the Johns Hopkins University data.
Considering the latest surge in COVID-19 cases, investors seem worried about the sustainability of U.S. economic recovery from the pandemic-led slump.
The delta variant is a serious concern as the number of new cases arising from the variant is being mostly observed among the unvaccinated population. In order to combat the situation, President Joe Biden has informed about some new initiatives to improve the vaccination rate. One of the measures include making it mandatory for all federal employees to attest to being vaccinated or deal with strict protocols, according to a CNN report.
Major companies are also making it mandatory for their employees to get vaccinated before returning to company campuses. Important names like Google (GOOGL - Free Report) , Facebook , Netflix (NFLX) and BlackRock can be safely added to the list of companies having a vaccine mandate.
Going on, the U.S. GDP grew at a 6.5% annualized rate in the second quarter of 2021, per the Commerce Department’s first estimate (as mentioned in a CNBC article). However, the metric lagged the Dow Jones estimate of 8.4%. Another disappointing economic data was observed with 400,000 people filing initial claims for unemployment benefits for the week ended Jul 24 and surpassed the Dow Jones estimate of 385,000, per a CNBC report.
Meanwhile, it is worth noting here that the second-quarter earnings season has already seen better-than-expected results, stimulating the rally in stock markets. Per FactSet data, 88% of S&P 500 companies have reported an earnings per share (EPS) surprise (per a CNBC article). In fact, at the end of the reporting season, if the figure stays at 88%, it will stand out as the highest percentage since FactSet started tracking the metric in 2008.
Consumer confidence in the United States also seems impressive as it stays at its highest level since February 2020. The Conference Board's measure of consumer confidence index stands at 129.1, comparing favorably with June’s reading of 128.9. Moreover, July’s reading beat the consensus estimate of the index declining to 123.9, per a Reuters’ poll. However, the metric continues to be below the pre-pandemic level of 132.6 in February 2020.
Strengthening optimism, coronavirus vaccines have been found to be effective against the delta variant. These include vaccines by Pfizer (PFE) /BioNTech and AstraZeneca (AZN). Two doses of their COVID-19 vaccine have been found to be about 88% effective against the variant, per a CNN report. Moreover, Moderna’s (MRNA) COVID-19 vaccine has been successful in producing neutralizing titers against all variants tested, including delta (B.1.617.12).
Moreover, the Fed’s continued support with easy monetary policies, fiscal stimulus support and reopening of non-essential business are strengthening hopes of rapid recovery from the coronavirus-led slump.
Why Consider Dividend Aristocrat ETFs?
Dividend aristocrats are blue-chip dividend-paying companies with a long history of increasing dividend payments year over year. Moreover, dividend aristocrat funds provide investors with dividend growth opportunities in comparison to other products in the space but might not necessarily have the highest yields.
‘Dividend aristocrats’ or ‘dividend growers’ are mostly deemed to be the smartest way to deal with market turmoil. Notably, the inclination toward dividend investing has been rising due to easing monetary policy on the global front, and market uncertainty triggered by the pandemic and deceleration in global growth. The demand for these funds is mostly driven by their characteristic of being the major source of consistent income for investors when returns from the equity markets are uncertain.
These products also form a strong portfolio, with a higher scope of capital appreciation as against simple dividend-paying stocks or those with high yields. As a result, these products deliver a nice combination of annual dividend growth and capital-appreciation opportunity and are mostly good for risk adverse long-term investors.
Against this backdrop, let’s take a look at some ETFs that investors can consider:
This is the largest and the most popular ETF in the dividend space, with AUM of $62.03 billion. The fund follows the NASDAQ US Dividend Achievers Select Index, composed of high-quality stocks, with a record of raising dividends every year. It charges 6 basis points (bps) in annual fees (read: Best Stocks & ETFs for Your Roth IRA).
This fund seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the S&P High Yield Dividend Aristocrats Index. The index screens companies that have consistently increased their dividend for at least 20 consecutive years and weights the stocks by yield. The fund has AUM of $20.54 billion. It charges 35 bps in fees per year (read: ETF Strategies to Combat the Rising Delta Strain Concerns).
The fund provides exposure to broad-cap U.S. companies with a consistent history of dividends and tracks the Dow Jones U.S. Select Dividend Index. The fund has AUM of $17.81 billion. It charges 39 bps in fees per year (read: Best ETF Investing Areas to Watch Out For in 2H21).
This fund seeks investment results, before fees and expenses that track the performance of the S&P 500 Dividend Aristocrats Index. It is the only ETF focusing exclusively on the S&P 500 Dividend Aristocrats — high-quality companies that have not just paid dividends but raised them for at least 25 consecutive years, with most doing so for 40 years or more. NOBL has amassed $8.81 billion in its asset base. It has an expense ratio of 0.35%.
This fund provides exposure to companies boasting a history of sustained dividend growth by tracking the Morningstar US Dividend Growth Index. The fund has AUM of $19.91 billion. It charges 8 bps in fees per year.
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Try Dividend Aristocrat ETFs to Fight Rising Delta Variant Woes
The world’s largest economy is witnessing a surge in the number of new delta variant cases in 49 states. The United States recorded more than 63,600 new daily cases over the last week on average, per the Johns Hopkins University data and as mentioned in a CNN report. Moreover, the number highlights the gravity of the situation as the United States had seen a 2021 low of 11,299 daily new cases on Jun 22. In the past seven days, there was at least a 50% rise in cases in 36 states (as of Jul 29), according to the Johns Hopkins University data.
Considering the latest surge in COVID-19 cases, investors seem worried about the sustainability of U.S. economic recovery from the pandemic-led slump.
The delta variant is a serious concern as the number of new cases arising from the variant is being mostly observed among the unvaccinated population. In order to combat the situation, President Joe Biden has informed about some new initiatives to improve the vaccination rate. One of the measures include making it mandatory for all federal employees to attest to being vaccinated or deal with strict protocols, according to a CNN report.
Major companies are also making it mandatory for their employees to get vaccinated before returning to company campuses. Important names like Google (GOOGL - Free Report) , Facebook , Netflix (NFLX) and BlackRock can be safely added to the list of companies having a vaccine mandate.
Going on, the U.S. GDP grew at a 6.5% annualized rate in the second quarter of 2021, per the Commerce Department’s first estimate (as mentioned in a CNBC article). However, the metric lagged the Dow Jones estimate of 8.4%. Another disappointing economic data was observed with 400,000 people filing initial claims for unemployment benefits for the week ended Jul 24 and surpassed the Dow Jones estimate of 385,000, per a CNBC report.
Meanwhile, it is worth noting here that the second-quarter earnings season has already seen better-than-expected results, stimulating the rally in stock markets. Per FactSet data, 88% of S&P 500 companies have reported an earnings per share (EPS) surprise (per a CNBC article). In fact, at the end of the reporting season, if the figure stays at 88%, it will stand out as the highest percentage since FactSet started tracking the metric in 2008.
Consumer confidence in the United States also seems impressive as it stays at its highest level since February 2020. The Conference Board's measure of consumer confidence index stands at 129.1, comparing favorably with June’s reading of 128.9. Moreover, July’s reading beat the consensus estimate of the index declining to 123.9, per a Reuters’ poll. However, the metric continues to be below the pre-pandemic level of 132.6 in February 2020.
Strengthening optimism, coronavirus vaccines have been found to be effective against the delta variant. These include vaccines by Pfizer (PFE) /BioNTech and AstraZeneca (AZN). Two doses of their COVID-19 vaccine have been found to be about 88% effective against the variant, per a CNN report. Moreover, Moderna’s (MRNA) COVID-19 vaccine has been successful in producing neutralizing titers against all variants tested, including delta (B.1.617.12).
Moreover, the Fed’s continued support with easy monetary policies, fiscal stimulus support and reopening of non-essential business are strengthening hopes of rapid recovery from the coronavirus-led slump.
Why Consider Dividend Aristocrat ETFs?
Dividend aristocrats are blue-chip dividend-paying companies with a long history of increasing dividend payments year over year. Moreover, dividend aristocrat funds provide investors with dividend growth opportunities in comparison to other products in the space but might not necessarily have the highest yields.
‘Dividend aristocrats’ or ‘dividend growers’ are mostly deemed to be the smartest way to deal with market turmoil. Notably, the inclination toward dividend investing has been rising due to easing monetary policy on the global front, and market uncertainty triggered by the pandemic and deceleration in global growth. The demand for these funds is mostly driven by their characteristic of being the major source of consistent income for investors when returns from the equity markets are uncertain.
These products also form a strong portfolio, with a higher scope of capital appreciation as against simple dividend-paying stocks or those with high yields. As a result, these products deliver a nice combination of annual dividend growth and capital-appreciation opportunity and are mostly good for risk adverse long-term investors.
Against this backdrop, let’s take a look at some ETFs that investors can consider:
Vanguard Dividend Appreciation ETF (VIG - Free Report)
This is the largest and the most popular ETF in the dividend space, with AUM of $62.03 billion. The fund follows the NASDAQ US Dividend Achievers Select Index, composed of high-quality stocks, with a record of raising dividends every year. It charges 6 basis points (bps) in annual fees (read: Best Stocks & ETFs for Your Roth IRA).
SPDR S&P Dividend ETF (SDY - Free Report)
This fund seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the S&P High Yield Dividend Aristocrats Index. The index screens companies that have consistently increased their dividend for at least 20 consecutive years and weights the stocks by yield. The fund has AUM of $20.54 billion. It charges 35 bps in fees per year (read: ETF Strategies to Combat the Rising Delta Strain Concerns).
iShares Select Dividend ETF (DVY - Free Report)
The fund provides exposure to broad-cap U.S. companies with a consistent history of dividends and tracks the Dow Jones U.S. Select Dividend Index. The fund has AUM of $17.81 billion. It charges 39 bps in fees per year (read: Best ETF Investing Areas to Watch Out For in 2H21).
ProShares S&P 500 Dividend Aristocrats ETF (NOBL - Free Report)
This fund seeks investment results, before fees and expenses that track the performance of the S&P 500 Dividend Aristocrats Index. It is the only ETF focusing exclusively on the S&P 500 Dividend Aristocrats — high-quality companies that have not just paid dividends but raised them for at least 25 consecutive years, with most doing so for 40 years or more. NOBL has amassed $8.81 billion in its asset base. It has an expense ratio of 0.35%.
iShares Core Dividend Growth ETF (DGRO - Free Report)
This fund provides exposure to companies boasting a history of sustained dividend growth by tracking the Morningstar US Dividend Growth Index. The fund has AUM of $19.91 billion. It charges 8 bps in fees per year.