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3 Dividend Growth ETFs & Stocks to Counter Looming Volatility

Sanghamitra Saha

The start of the year 2019 may be great for Wall Street, but volatility is looming none the less. First, a solution to the ongoing U.S.-China trade crisis is not in sight right now. Per Washington Post, a long-term agreement that would fulfill President Trump and Xi Jinping’s terms may not take place this week even if the two conform to a brief treaty (read: U.S.-China Trade Talks Begin: 5 Safe ETFs to Follow).

After more than a one-month-long impasse, the U.S. federal government reopened in January-end for three weeks. A deadlock in passing a spending bill, wherein Trump demanded $5.6 billion funding for a border wall that was being opposed by the Democrats, was the main reason for the shutdown. Since the Democrats are still against the border funds, uncertainty looms large (read: U.S. Government Reopens: Tap High Beta & Momentum ETFs).

Then global growth worries are there to unsettle the market momentum. The International Monetary Fund (IMF) has forecast global growth of 3.5% for this and 3.6% for the next year. The forecast fell by 0.2 percentage points and 0.1 percentage point from the October report. IMF indicated that the global economy is likely to slow down this year after two solid years of expansion. This year, the economy is carrying more downside risks (read: IMF Cuts Global Growth Outlook: Bet on 5 Quality ETFs).

Why to Focus on Dividend Aristocrat ETFs & Stocks

Dividend aristocrats are the dividend-paying companies, which have a long history of raising dividend payments year over year. These provide hedge against economic uncertainty and are high-quality in nature.

The S&P 500 Dividend Aristocrat index has historically outperformed the S&P 500 index with lower volatility over a longer period of time. The standard deviation (which measures the risk factor) of Proshares S&P 500 Dividend Aristocrats ETF NOBL is currently 11.78% versus 12.85% recorded by SPDR S&P 500 ETF SPY.

We thus highlight a few dividend growth ETFs and stocks that could offer investors a quality approach in this edgy market.

ETF Picks

SPDR S&P Global Dividend ETF WDIV

The underlying S&P Global Dividend Aristocrats Index measures the performance of high dividend-yield companies included on the S&P Global BMI that have followed a managed-dividends policy of increasing or stable dividend for at least 10 consecutive years. The fund yields 4.18% annually.

iShares Select Dividend ETF DVY

The fund gives exposure to broad-cap U.S. companies with a regular dividend payment history. The fund holds around 100 stocks in the portfolio with five-year records of paying out dividend. The fund yields 3.42% annually.

SPDR S&P Dividend ETF SDY

The underlying S&P High Yield Dividend Aristocrats Index measures the performance of the highest dividend yielding S&P Composite 1500 Index constituents that have followed a managed-dividends policy of consistently increasing dividends every year for at least 20 consecutive years. The fund yields 2.60% annually.

Stock Picks

Archer Daniels Midland Company ADM

This company procures, transports, stores, processes and merchandises agricultural commodities and products. The company has raised dividends several times since 2013. The stock comes from a top-ranked Zacks sector (top 13%). The stock has a Zacks Rank #1. The dividend yield is 3.03% annually.

Procter & Gamble Company PG

This Zacks Rank #2 (Buy) company is engaged in the manufacture and sale of a range of branded consumer packaged goods. Since August 2013, the company has raised dividends about five times. The dividend yield of the stock is 3.07% annually.

International Business Machines Corporation IBM

The company operates in five segments: Global Technology Services, Global Business Services, Software, Systems and Technology, and Global Financing. Since August 2013, the company hiked dividends around five times.

The stock comes from a top-ranked Zacks industry (top 18%). The Zacks Rank #3 stock has a dividend yield of 4.68% annually. Currently, this is the highest yield provided by any Dow company (read: ETFs to Buy on IBM's Annual Revenue Growth Story).

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