Dividend ETFs: Capitalizing on a Trump Bump?
This article was originally published on ETFTrends.com.
President Donald Trump enacted a tax reform plan that allowed companies to repatriate billions of dollars in overseas revenue back home, driving increased demand for dividend stock ETF strategies that cover companies with a new cash infusion to pay back to investors.
For example, the iShares Core Dividend Growth ETF (DGRO) , Schwab US Dividend Equity ETF (SCHD) and Vanguard Dividend Appreciation ETF (VIG) have brought in over $2 billion combined this year, reports Wendy Soong for Bloomberg.
Under the new tax reforms, large multi-national companies with a sizeable overseas footprint may now bring back their foreign revenue at a lower rate, and many investors believe the repatriation efforts could mean that companies will have more money to pay back to loyal investors.
Where to Invest in ETFs
The ETFs experiencing the large investment interest also include those with little exposure to sectors like utilities, which are more domestically focused and less likely to benefit from the repatriation tax holiday.
On the other hand, ETFs like the SPDR S&P Dividend ETF (SDY) , iShares Select Dividend ETF (DVY) and iShares Core High Dividend ETF (HDV) , which have larger utilities tilts, experienced a combined $2.3 billion in outflows so far this year.
Related: 4 Timely ETFs That Invest with a Purpose
The promise of large distributions from technology companies has lured greater investment interest for dividend ETFs. In the third quarter, Bloomberg projects tech companies could distribute about $20 billion in dividends to shareholders, followed by financials with $17 billion, health care at $14 billion and consumer staples at $13 billion.
“Investors are moving money into dividend funds that stand to gain from cash repatriation,” Todd Rosenbluth, director of ETF and mutual fund research at CFRA Research, told Bloomberg.
For more information on dividend-paying stocks, visit our dividend ETFs category.
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