From Beijing to United States, investors are spooked by possibilities of a second wave of coronavirus. Per a CNN report, the WHO has called a group of more than 100 coronavirus cases in Beijing a "significant event." Worries regarding the second wave are increasing as the virus has now spread beyond the Xinfadi market, resulting in at least 29 neighborhoods under lockdown in China’s capital.
Meanwhile, more than 2.1 million coronavirus cases have been recorded in the United States, with a death toll of at least 116,000. Per a CNN report, coronavirus cases have surged in 18 states over the past week, with six states reporting more than a 50% jump. Resultantly, some government and health officials have paused reopening efforts for some time. One of the 19 models currently featured on the U.S. Centers for Disease Control and Prevention website forecasts deaths from the virus to cross 201,000 in the United States by Oct 1, revising the figure upward from 170,000 predicted in the previous week (per a CNN report).
Going on, Fed Chair Jerome Powell maintained a dovish stance in the FOMC meeting, concluded on Jun 10. He informed that there is no expectation of a rate hike through 2022. The Fed has pledged to continue pumping in stimulus to support the economy and strengthen it. The central bank has also reiterated that the Fed funds rate would likely stay in the 0-0.25% range and confirmed continued bond-buying. The central bank forecasts the unemployment rate to fall to 9.3% by the end of this year. Though the figure is down from May’s 13.3%, it will be noticeably above 3.5% recorded in February — a near 50-year low.
The unemployment rate will later likely improve to 6.5% in 2021. The U.S. GDP is projected to shrink 6.5% this year before rebounding 5% next year and 3.5% in 2022. Inflation also has been forecast to remain below the Fed’s 2% target through 2022.
Dividend Growth ETFs for a Healthy Portfolio
The appeal of dividend ETFs has been rising in the face of easing monetary policy on the global front, and market uncertainty triggered by the pandemic and deceleration in global growth. This is because dividend-paying securities are major sources of consistent income for investors when returns from equity markets are uncertain.
Although there are plenty of options in the dividend ETF world, ‘dividend aristocrats’ or ‘dividend growers’ could be the smartest way to deal with the current market turmoil. Investors mostly face difficulty in choosing between high-dividend paying ETFs and divided growth ETFs.
Research has shown that in the shorter run, during turbulent market times, the sustainability of dividends becomes a major criterion as a lot of companies are observed to be cutting or suspending their dividend payouts. Interestingly, a comparison of the median values of the S&P 500 Dividend Aristocrats and the High Dividend Index on a number of fundamental metrics that measure the strength of companies making dividend payouts from December 1991 to April 2020 revealed that the former are comparatively safer. Going on, the S&P 500 Dividend Aristocrats turned out to be having larger market caps, more profitability with higher buybacks, cash on hand and earnings than their high yielding peers.
Here are a few ETFs to consider:
Vanguard Dividend Appreciation ETF (VIG - Free Report)
This is the largest and most popular ETF in the dividend space, with AUM of $42.10 billion. The fund follows the NASDAQ US Dividend Achievers Select Index, which is composed of high-quality stocks with a record of raising dividends every year. It charges 6 basis points (bps) in annual fees. VIG carries a Zacks ETF Rank #2 (Buy), with a Medium-risk outlook (read: A Quick Guide to Dividend Aristocrat ETFs).
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 $10.56 billion. It charges 8 bps in fees per year and has a Zacks ETF Rank of 2, with a Medium-risk outlook (read: Stocks Look Set for a Rally: Top-Ranked ETFs to Buy).
ProShares S&P 500 Dividend Aristocrats ETF (NOBL - Free Report)
This product provides exposure to high-quality companies that have not just paid dividends but have hiked the same for at least 25 consecutive years, with most doing so for 40 years or more. It follows the S&P 500 Dividend Aristocrats Index. NOBL has amassed $5.84 billion in its asset base. It has an expense ratio of 0.35% and a Zacks ETF Rank #3 (Hold), with a Medium-risk outlook (read: Here's Why Dividend Growth ETFs Make a Smarter Pick Now).
First Trust Rising Dividend Achievers ETF (RDVY - Free Report)
This fund lends exposure to a diversified portfolio of companies with a stellar dividend payout history. It tracks the NASDAQ US Rising Dividend Achievers Index, charging investors 50 bps in annual fees. The ETF has accumulated $1.20 billion in its asset base. It carries a Zacks ETF Rank of 3, with a Medium-risk outlook.
Invesco Dividend Achievers ETF (PFM - Free Report)
With $329.9 million, this fund offers exposure to companies that have raised dividends for 10 or more straight fiscal years. It has an expense ratio of 0.54%. PFM is a Zacks #3 Ranked ETF, with a Medium-risk outlook.
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