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Play Dividend Aristocrat ETFs After a Dull Q1 as Threats Remain
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The major broad market indices remained in the red territory for what could be called their worst quarter since the first three months of 2020. The Dow Jones Industrial Average is down 4.6% in the period. The other two broad market indices, the S&P 500 and the Nasdaq Composite, have also lost around 4.9% and 9% respectively, in first-quarter 2022. Notably, the S&P 500 index declined around 20% in the same period two years ago. The Russia-Ukraine war crisis, Fed rate hike and high inflation levels kept the stocks under pressure and investors on edge.
These factors still seem to be clouding the investing world. The U.K. intelligence officials have informed that the Russian troops are continuing to shell Kyiv, the capital city of Ukraine, and even hold their positions (per a CNBC article). Concerns pertaining to natural gas supply prevail in Europe as Russian president Vladimir Putin stays rigid about receiving payments in rubles.
At the same time, while taking an aggressive approach to increasing the rates, the central bank informed about plans to increase the interest rates six times this year. The Federal Reserve is aiming at a consensus funds rate of 1.9% by 2022-end (per a CNBC article).
As the turbulence continues, rising commodity prices and fears of further disruptions in global supply-chain distributions might stoke higher inflation. Also, as the Federal Reserve took an aggressive approach to increase the rates, market participants are worried about the U.S. economy slipping into a stagflation due to high-interest rates and steep inflation.
Investors are also scared of the recessionary signals coming from the bond market as the 2-year and 10-year Treasury yield curve inverts for the first time since 2019.
The core personal consumption expenditures (PCE) price index rose 5.4% year over year, witnessing the largest jump in about 40 years (per a CNBC article). The Federal Reserve considers this metric as the most dependable inflation indicator. The index was a little shy of the Dow Jones estimate of 5.5%.
Commenting on the current market environment, George Mateyo, Key Private Bank chief investment officer, has mentioned that “We’re going to be bouncing around between good news and bad news, unfortunately. That’s going to create some volatility,” as stated in a CNBC article.
Why Consider Dividend Aristocrat ETFs?
Dividend aristocrats are blue-chip dividend-paying companies with a long track record of increasing dividend payments year over year. Moreover, dividend aristocrat funds give investors dividend growth opportunities compared to other products in the space but might not necessarily have the highest yields.
‘Dividend aristocrats’ or ‘dividend growers’ are mostly deemed the smartest way to deal with market turmoil. The inclination toward dividend investing is rising because of easing monetary policy on the global front and the market uncertainty triggered by the pandemic and deceleration in global growth. Demand for these funds is mainly 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 against simple dividend-paying stocks or those with high yields. As a result, these products deliver an excellent combination of annual dividend growth and capital-appreciation opportunity and are most beneficial to risk-averse long-term investors.
Against this backdrop, let’s take a look at some ETFs that investors can consider:
Vanguard Dividend Appreciation ETF is the largest and the most popular ETF in the dividend space, with AUM of $67.62 billion. VIG follows the S&P U.S. Dividend Growers Index. Vanguard Dividend Appreciation ETF charges 6 basis points (bps) in annual fees (read: 5 ETFs to Add As Yield Curve Signals Recession).
SPDR S&P Dividend ETF 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 consistently increased their dividend for at least 20 consecutive years. SDY has AUM of $21.66 billion. SPDR S&P Dividend ETF charges 35 bps in fees per year (read: Guide to Dividend Aristocrat ETFs).
iShares Select Dividend ETF provides exposure to broad-cap U.S. companies with a consistent history of dividends and tracks the Dow Jones U.S. Select Dividend Index. DVY has AUM of $22.30 billion. iShares Select Dividend ETF charges 38 bps in fees per year (as stated in the prospectus) (read: Dividend ETFs Scaling New Highs).
ProShares S&P 500 Dividend Aristocrats ETF seeks investment results before fees and expenses that track the performance of the S&P 500 Dividend Aristocrats Index. NOBL is the only ETF focusing exclusively on the S&P 500 Dividend Aristocrats, which are high-quality companies that not just paid out dividends but also raised the same for at least 25 consecutive years, with most doing so for 40 years or more. NOBL amassed $10.31 billion in its asset base. ProShares S&P 500 Dividend Aristocrats ETF has an expense ratio of 0.35% (read: 5 ETFs to Tackle Ukraine-Russia War, Inflation & Fed Rate Hike Woes).
This fund provides exposure to companies boasting a history of sustained dividend growth by tracking the Morningstar US Dividend Growth Index. DGRO has AUM of $23.96 billion. iShares Core Dividend Growth ETF charges 8 bps in fees per year.
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Play Dividend Aristocrat ETFs After a Dull Q1 as Threats Remain
The major broad market indices remained in the red territory for what could be called their worst quarter since the first three months of 2020. The Dow Jones Industrial Average is down 4.6% in the period. The other two broad market indices, the S&P 500 and the Nasdaq Composite, have also lost around 4.9% and 9% respectively, in first-quarter 2022. Notably, the S&P 500 index declined around 20% in the same period two years ago. The Russia-Ukraine war crisis, Fed rate hike and high inflation levels kept the stocks under pressure and investors on edge.
These factors still seem to be clouding the investing world. The U.K. intelligence officials have informed that the Russian troops are continuing to shell Kyiv, the capital city of Ukraine, and even hold their positions (per a CNBC article). Concerns pertaining to natural gas supply prevail in Europe as Russian president Vladimir Putin stays rigid about receiving payments in rubles.
At the same time, while taking an aggressive approach to increasing the rates, the central bank informed about plans to increase the interest rates six times this year. The Federal Reserve is aiming at a consensus funds rate of 1.9% by 2022-end (per a CNBC article).
As the turbulence continues, rising commodity prices and fears of further disruptions in global supply-chain distributions might stoke higher inflation. Also, as the Federal Reserve took an aggressive approach to increase the rates, market participants are worried about the U.S. economy slipping into a stagflation due to high-interest rates and steep inflation.
Investors are also scared of the recessionary signals coming from the bond market as the 2-year and 10-year Treasury yield curve inverts for the first time since 2019.
The core personal consumption expenditures (PCE) price index rose 5.4% year over year, witnessing the largest jump in about 40 years (per a CNBC article). The Federal Reserve considers this metric as the most dependable inflation indicator. The index was a little shy of the Dow Jones estimate of 5.5%.
Commenting on the current market environment, George Mateyo, Key Private Bank chief investment officer, has mentioned that “We’re going to be bouncing around between good news and bad news, unfortunately. That’s going to create some volatility,” as stated in a CNBC article.
Why Consider Dividend Aristocrat ETFs?
Dividend aristocrats are blue-chip dividend-paying companies with a long track record of increasing dividend payments year over year. Moreover, dividend aristocrat funds give investors dividend growth opportunities compared to other products in the space but might not necessarily have the highest yields.
‘Dividend aristocrats’ or ‘dividend growers’ are mostly deemed the smartest way to deal with market turmoil. The inclination toward dividend investing is rising because of easing monetary policy on the global front and the market uncertainty triggered by the pandemic and deceleration in global growth. Demand for these funds is mainly 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 against simple dividend-paying stocks or those with high yields. As a result, these products deliver an excellent combination of annual dividend growth and capital-appreciation opportunity and are most beneficial to risk-averse 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)
Vanguard Dividend Appreciation ETF is the largest and the most popular ETF in the dividend space, with AUM of $67.62 billion. VIG follows the S&P U.S. Dividend Growers Index. Vanguard Dividend Appreciation ETF charges 6 basis points (bps) in annual fees (read: 5 ETFs to Add As Yield Curve Signals Recession).
SPDR S&P Dividend ETF (SDY - Free Report)
SPDR S&P Dividend ETF 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 consistently increased their dividend for at least 20 consecutive years. SDY has AUM of $21.66 billion. SPDR S&P Dividend ETF charges 35 bps in fees per year (read: Guide to Dividend Aristocrat ETFs).
iShares Select Dividend ETF (DVY - Free Report)
iShares Select Dividend ETF provides exposure to broad-cap U.S. companies with a consistent history of dividends and tracks the Dow Jones U.S. Select Dividend Index. DVY has AUM of $22.30 billion. iShares Select Dividend ETF charges 38 bps in fees per year (as stated in the prospectus) (read: Dividend ETFs Scaling New Highs).
ProShares S&P 500 Dividend Aristocrats ETF (NOBL - Free Report)
ProShares S&P 500 Dividend Aristocrats ETF seeks investment results before fees and expenses that track the performance of the S&P 500 Dividend Aristocrats Index. NOBL is the only ETF focusing exclusively on the S&P 500 Dividend Aristocrats, which are high-quality companies that not just paid out dividends but also raised the same for at least 25 consecutive years, with most doing so for 40 years or more. NOBL amassed $10.31 billion in its asset base. ProShares S&P 500 Dividend Aristocrats ETF has an expense ratio of 0.35% (read: 5 ETFs to Tackle Ukraine-Russia War, Inflation & Fed Rate Hike Woes).
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. DGRO has AUM of $23.96 billion. iShares Core Dividend Growth ETF charges 8 bps in fees per year.