Dividends have been a consistent source of income for investors seeking regular returns during both bull and bear markets. This is because dividend-focused products offer safety in the form of payouts and stability in the form of mature companies that are less volatile to large swings in stock prices.
In the third quarter, global dividends hit a record, but the annual growth has decelerated sharply, signaling that “a marked slowdown is under way,” according to the quarterly survey by Janus Henderson.
Inside Q3 Numbers
Per the survey, global dividends in the third quarter grew 2.8% year over year to $355.3 billion. The growth rate is much below the year-ago quarter growth of 4.4%. The marked slowdown stemmed from a softening global economy, which has been hit by trade issues and geopolitical tension (read: Worried About Dividend ETFs' Rally? 5 Low P/E Plays for You).
U.S. dividends touched a record with AT&T (T - Free Report) being the largest payer this year, followed by Apple (AAPL - Free Report) , Exxon Mobil (XOM - Free Report) and Microsoft (MSFT - Free Report) . AT&T has reclaimed its top position for the first time since 2012 thanks to its acquisition of Time Warner in 2018 as the combined company will distribute close to $14.9 billion in dividend.
Japan and Canada also saw third-quarter records while the United Kingdom’s dividends were boosted by very large special dividends from banks and miners. Meanwhile, Australia saw a big decline in dividends with two fifths of companies cutting payouts. China also showed weakness with almost half the Chinese companies reducing their payouts.
Coming to sectors, energy saw the strongest dividend growth in Q3 mostly driven by Russian oil companies. China and Hong Kong, Canada and the United States also made a significant contribution to the increase. Basic materials’ sector growth was boosted by special dividends (read: Top & Flop ETFs Halfway Through Q4).
How to Play?
Amid dividend growth slowdown, investors should make a bet in a basket of dividend stocks via ETFs that carries lower risk and is a diversified play. In fact, the dividend aristocrats could be the most beneficial way. Dividend aristocrats are the blue-chip dividend-paying companies that have a long history of raising dividend payouts year over year. Investors should note that the dividend aristocrat funds offer more dividend growth opportunities when compared to the other products in the space but might not necessarily have the highest yields.
Below we have presented a bunch of dividend aristocrats ETFs that could be a solid pick for investors. These have logged in strong returns so far this year and have a favorable Zacks ETF Rank #1 (Strong Buy) or 2 (Buy) or 3 (Hold).
First Trust NASDAQ Rising Dividend Achievers ETF (RDVY - Free Report)
This fund provides exposure to a diversified portfolio of 49 companies with a history of paying dividends. It tracks the NASDAQ US Rising Dividend Achievers Index, charging investors 50 bps in annual fees. The ETF has accumulated $995.8 million in its asset base and sees a good volume of 154,000 shares a day on average. It has climbed 30.4% so far this year and has a Zacks ETF Rank #2 with a Medium risk outlook (read: A Spread of Top Dividend Growth ETFs for Your Portfolio).
DIVCON Leaders Dividend ETF (LEAD - Free Report)
With AUM of $32 million, this ETF uses DIVCON’s uniquely forward-looking methodology and systematic weighting. It invests in only anticipated dividend growth leaders, which are large-cap companies with the highest probability of increasing their dividend in the next 12 months. It holds 61 stocks in its basket and charges 43 bps in annual fees. The fund is up 27.8% in the year-to-date timeframe and has a Zacks ETF Rank #3.
WisdomTree Global ex???U.S. Quality Dividend Growth Fund (DNL - Free Report)
This fund offers exposure to dividend-paying companies with quality and growth characteristics in developed and emerging equity markets by tracking the WisdomTree Global ex-U.S. Quality Dividend Growth Index. It holds 278 stocks in its basket and charges 58 bps in fees from investors per year. The ETF has AUM of $92.8 million and trades in average daily volume of 9,000 shares. It has gained 25.7% so far this year and has a Zacks ETF Rank #3 with a Medium risk outlook.
Vanguard Dividend Appreciation ETF (VIG - Free Report)
This is the largest and most-popular ETF in the dividend space with AUM of $40.2 billion and average daily volume of about 957,000 shares. The fund follows the NASDAQ US Dividend Achievers Select Index, which is composed of high quality stocks that have a record of raising dividends every year. It holds 182 securities in the basket and charges 6 bps in annual fees. VIG has gained 24.3% this year and has a Zacks ETF Rank #1 with a Medium risk outlook (read: Dividend Growth ETFs for Long Term Investors).
iShares Core Dividend Growth ETF (DGRO - Free Report)
This fund provides exposure to companies having a history of sustained dividend growth by tracking the Morningstar US Dividend Growth Index. Holding 478 stocks in its basket, the fund has AUM of $9.5 billion and trades in good volumes of about 1.3 million shares. It charges 8 bps in fees per year and has risen 23.6% in the year-to-date timeframe. The product has a Zacks ETF Rank #2 with a Medium risk outlook.
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