3 Dividend ETFs Pack on Assets as Fed Meets
This article was originally published on ETFTrends.com.
The Federal Reserve meets this week and even though expectations are in place for another interest rate hike, some investors are embracing dividend ETFs. In fact, three of the top 10 asset-gathering ETFs last week, including two of the top three, were dividend funds.
That trio includes the Schwab US Dividend Equity ETF (SCHD) , which added $2.33 billion in assets. SCHD includes 100 stocks based on strong fundamentals, dividend yields and consistent dividend payouts for at least 10 consecutive years.
The iShares Select Dividend ETF (DVY) added $3.54 billion in new assets last week while the Vanguard Dividend Appreciation ETF (VIG) added $1.89 billion.
Dividend growth as a means of trumping inflation could and arguably should serve to highlight the advantages of the ETFs that focus on dividend growth stocks. That group is comprised of well-established ETFs that emphasize dividend increase streaks as well as a new breed of funds that look for sectors chock full of stocks that have the potential to be future sources of dividend growth.
Companies with a record of raising dividends are more attractive than usual since they issue their dividends cautiously. These dividend payers typically include higher quality companies that are more cautious when raising dividends since they would do so without stretching their balance sheets.
Income-minded investors have also typically gravitated toward these high quality companies as firms that regularly raise dividends also tend to be confident about their ability to continue paying the dividends as the dividend increases are also calculated in line with future growth.
“While most dividend-focused funds employ either a dividend-growth strategy or a focus on yield, this offering falls between the two camps. It focuses on durable, high-quality companies with dividend yields, but it doesn't reach into distressed, deep-value territory,” said Morningstar of SCHD in a recent note.
Last week, investors added $2.33 billion in new assets to SCHD, a total surpassed by just two other ETFs. Year-to-date, SCHD has seen inflows of $2.72 billion, good for seventh-best among all US-listed ETFs.
SCHD charges just 0.07% per year, or $7 on a $10,000 investment, making it one of the least expensive dividend ETFs. Schwab clients can realize additional cost savings on SCHD by using the firm's ETF OneSource commission-free platform.
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