This article was originally published on ETFTrends.com.
Dividend-paying stocks and related ETFs have helped ease the pain as U.S. equity markets pulled back this year, and the strategy may continue to be an attractive defensive play ahead.
S&P 500 companies have spent almost $421 billion on dividends for the year through November, a record setting amount that outpaced last year's $391 billion for the period and the full year total of $420 billion, the Wall Street Journal reports. Furthermore, over two dozen companies have announced additional dividend increases this month, which could push the year's total to an even higher level.
Investors are enjoying the dividend growth due to a surge in company profits following last year's broad corporate tax cuts. However, some are worried that the benefits of the corporate tax cuts are a one-off event, with some bracing for tougher conditions ahead.
“There was a confluence of a couple of things that contributed to dividends that won’t happen again,” Jim Tierney, chief investment officer of concentrated U.S. growth at AllianceBernstein, told the WSJ. “Far more companies brought their dividends back and were more comfortable paying that higher dividend, driven by earnings growth.”
Nevertheless, analysts are predicting another potentially banner year for dividends in 2019 if profit growth ends up at around current expectations. According to Goldman Sachs, dividends are estimated to still rise 6% next year, although lower than the 9% rate of 2018.
“Can the pace of dividend growth continue? Not a chance,” Tierney said. “Will the level of dividends continue? Maybe, but certainly not the rate of growth.”
ETF investors can also target U.S. dividend growers through a number of options. For instance, the iShares Core Dividend Growth ETF (DGRO) specifically targets companies that pay a qualified dividend, must have at least five years of uninterrupted annual dividend growth and their earnings payout ratio must be less than 75%. DGRO shows a 2.21% 12-month yield.
The Vanguard Dividend Appreciation ETF (VIG) , the largest dividend-related ETF on the market, tracks U.S. stocks that have increased dividends on a regular basis for at least 10 consecutive years and has a 1.86% 12-month yield.
The Schwab US Dividend Equity ETF (SCHD) includes 100 stocks based on strong fundamentals, such as cash flow to debt, return on equity, dividend yield and consistent dividend payouts for at least 10 consecutive years, and it has a 2.63% 12-month yield. The options is also the least expensive dividend ETF, with a 0.07% expense ratio.
The Invesco Dividend Achievers ETF (PFM) also selects companies that have increased annual dividends for 10 or more consecutive fiscal years. The ETF comes with a 2.67% 12-month yield.
The SPDR S&P Dividend ETF (SDY) holds firms that have a minimum dividend increase streak of 20 years for inclusion and shows a 2.40% 12-month yield. Moreover, SDY follows a yield-weighting methodology that allocates a larger weight toward those with higher yields, so the portfolio leans toward more mid-sized companies.
The ProShares S&P 500 Aristocrats ETF (NOBL) only targets S&P 500 companies that have increased their dividends for at least 25 consecutive years and offers a 2.10% 12-month yield.
The WisdomTree U.S. Quality Dividend Growth Fund (DGRW) includes companies with high long-term earnings-growth forecasts for the next three to five years and weights components based on the value of dividends they are expected to pay over the next year. DGRW has a 2.07% 12-month yield.
For more information on dividend stocks, visit our dividend ETFs category.
POPULAR ARTICLES AND RESOURCES FROM ETFTRENDS.COM
- SPY ETF Quote
- VOO ETF Quote
- QQQ ETF Quote
- VTI ETF Quote
- JNUG ETF Quote
- Top 34 Gold ETFs
- Top 34 Oil ETFs
- Top 57 Financials ETFs
- A Holiday Treat With a Video Game ETF
- Eyeing a Rebound in Financial Services ETFs
- Renewed Affinity For Gold Could Benefit Silver ETFs
- ‘Merī Kurisumasu,’ Japanese Yen ETFs a Holiday Volatility Safe Haven
- Baby It’s Cold Outside Without These Natural Gas ETFs