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5 Dividend Growth ETFs to Fight Trade and Inflation Fears

Zacks Investment Research

The year 2018 has been anything but smooth so far for the stock market. First, rising rate concerns in the late January-early February period, then trade war tensions and last but not the least, a pickup in inflation have been occasional deterrents.

5 Dividend Growth ETFs to Fight Trade and Inflation Fears

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Trade Tensions

President Trump’s imposition of tariffs on $50 billion worth of Chinese imports has led China to retaliate by levying tariffs by equal measure. Now, Washington has released a list of Chinese goods worth $200 billion on which 10% tariffs will be levied.

Trump has even gone on to say that if Beijing continues to retaliate, the United States will impose a total tariff on $550 billion of Chinese goods — an amount higher than total U.S. imports from China last year.

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Apart from this, the Trump administration imposed a 25% tariff on steel imports and 10% on aluminum of some countries. These countries are expected to hit back as well, driving chances of a broad-based global trade war.

Inside Rising Inflation

Consumer prices in the United States grew 2.9% year over year in June, surpassing 2.8% recorded in May and in line with market expectations. It also marked the highest inflation rate since February 2012. Higher oil prices play a huge role in boosting inflation. On the downside, a steep rise in inflation may erode subtle wage gains.

The Fed also raised PCE inflation expectations in its latest June meeting. Expectations were upped from 1.9% to 2.1% for 2018 and 2.0% to 2.1% for 2019 but were kept intact at 2.1% for 2020.

Rising Rate Worries

The Fed is now planning a total of four rate hikes in 2018. This is against the Fed’s previous projections of total three rate increases for this year. The yield on 10-year benchmark Treasury yield crossed the 3% mark in the first half of 2018. While the rise in rates moderated somewhat in the second half on trade war tensions, investors should be wary of rising rate environment in the coming days.


Quality ETFs in Focus

Against this economic backdrop, below we highlight a few dividend growth ETFs that could offer investors a quality approach.

ProShares S&P 500 Aristocrats ETF (NYSEARCA:NOBL)

This product provides exposure to companies that raised dividend payments annually for at least 25 years by tracking the S&P 500 Dividend Aristocrats.

Schwab U.S. Dividend Equity ETF (NYSEARCA:SCHD)

The underlying index of the fund — Dow Jones U.S. Dividend 100 Index — looks to measure the performance of high dividend yielding U.S. stocks that have a record of consistently paying dividends and that are selected on the basis of fundamental strength relative to their peers.

Vanguard Dividend Appreciation ETF (NYSEARCA:VIG)

The underlying index of the fund — the NASDAQ US Dividend Achievers Select Index — consists of companies that have a record of increasing dividends over time.

iShares Core Dividend Growth ETF (NYSEARCA:DGRO)

The underlying Morningstar US Dividend Growth Index is composed of U.S. equities with a history of consistently growing dividends.

First Trust NASDAQ Rising Dividend Achievers ETF (NASDAQ:RDVY)

This fund also looks to provide access to a portfolio of companies with a history of paying dividends.

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