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4 Dividend Growth ETFs to Watch as Global Dividends Top

Sanghamitra Saha
Asbury Automotive (ABG) shares have started gaining and might continue moving higher in the near term, as indicated by solid earnings estimate revisions.

U.S. dividend payments reached a record level of $113 billion (up 5.2% year over year) in the first quarter as almost 80% of companies have augmented their payouts from a year earlier, per a report from Janus Henderson Group Plc, as quoted on Bloomberg.

S&P Dow Jones Indices declared that the indicated dividend net rise for U.S. domestic common stocks grew $18.8 billion during Q1, up from the increases of $4.5 billion for Q4 2017 and $10.9 billion for Q1 2017. Dividend payouts for the S&P 500 touched a record $12.79 per share in Q1, slightly higher than the previous $12.78 payout for Q4 2017.

On the basis of the ongoing declared dividend rates for the S&P 500, 2018 is likely to see a 5.5% year-over-year uptick in dividend payments, up from 2.3% at year-end 2017, per a Senior Index Analyst at S&P Dow Jones Indices.

Record dividends at the United States and Canada helped the global dividends set a first-quarter record of $244.7 billion, as per the Janus Henderson Global Dividend Index, marking a 10% rise from the previous year.

Why the Jump

The tax reform played a major role in this dividend rise. The Trump administration has enacted a shift from the current worldwide tax system to a territorial one, letting companies send their offshore profits back to the United States without extra taxes.

The administration’s announcement of a one-time repatriation tax on about $2.5 trillion in offshore earnings and lower tax rates have resulted in fatter and faster dividend hikes. Citi strategists believe that “the U.S. has become a capital-lite and distribution-heavy stock market” (read: What Makes iShares' Dividend and Buyback ETF Launch Timely?).

What Lies Ahead?

The magnitude of Q1 dividend payouts at U.S. companies is showing signs of managements’ confidence in the new tax system. At the other side of the pond, the second quarter is seasonally crucial and stockholders may see a much wider range of industries and European countries adding to global dividend payments than Q1.

Janus Henderson sees global payouts touching a record $1.36 trillion in 2018, representing year-over-year growth of 6% in underlying terms.

ETFs in Focus

iShares Core Dividend Growth ETF DGRO

The underlying Morningstar US Dividend Growth Index is composed of U.S. equities with a history of consistently growing dividends. Financials, Health Care, Information Technology, Industrials, Consumer Staples and Consumer Discretionary have a double-digit weight in the fund. The fund has a Zacks Rank #2 (Buy) (read: Top ETF Picks for Your IRA).

Vanguard Dividend Appreciation ETF VIG

The underlying NASDAQ US Dividend Achievers Select Index consists of common stocks of companies that have a record of increasing dividends over time. The fund is heavy on Industrials followed by Consumer Services, Health Care and Consumer Goods. The fund has a Zacks Rank #2.

ProShares S&P 500 Dividend Aristocrats ETF NOBL

The underlying S&P 500 Dividend Aristocrats Index picks companies that are currently members of the S&P 500 and have increased dividend payments each year for at least 25 years. Consumer Staples, Industrials, Consumer Discretionary, Materials and Health Care have a double-digit weight each. The fund has a Zacks Rank #2 (read: 4 Safe Dividend Growth ETFs & Stocks for a Faltering Market).

ProShares MSCI Europe Dividend Growers ETF EUDV

The underlying index of the fund targets companies that are currently members of MSCI Europe and have increased dividend payouts each year for at least 10 years. United Kingdom, Switzerland and France have a double-digit weight in the fund. Though European dividends were a bit subdued in Q1, the fund may see better days ahead thanks to seasonality. So, investors may keep an eye on the fund. It currently has a Zacks Rank #3 (Hold).

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ISHRS-CORE DG (DGRO): ETF Research Reports
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