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Dividend ETFs to Reap Record Quarterly Payout


Investors have honed in on dividend exchange traded funds as Treasury yields remain depressed near historical lows. Now with companies raising payouts to shareholders to record levels, dividend ETFs look like they have even more going for them.

“Dividends continue to have a great year, with actual cash payments increasing over 19% and the forward indicated dividend rate reaching a new all-time high,” Howard Silverblatt, Senior Index Analyst at S&P Dow Jones Indices, said in an ETF Strategy article.

According to S&P Dow Jones Indices, companies increased dividends by $8.8 billion in the third quarter, with 439 dividend increases during the third quarter of this year, or a 25.4% gain year-over-year.

On the other hand, only 53 companies of the approximately 10,000 U.S. traded stocks diminished dividends in the third quarter, compared to 23 issues year-over-year.

For non-S&P 500 common issues, the percentage of dividend payers increased to 43.4% in the third quarter from 42.7% in the second quarter, 41.7% in the first quarter and 41.4% at the end of the fourth quarter 2011.

Silverblatt calculated that yields for paying issues dropped to 2.66% at the end of the third quarter from 2.77% at the end of the second.

“The yield decline was the result of a strong third quarter equity market,” Silverblatt said. “Yields remain relatively high when compared to competing income producers such as bonds, treasuries or CDs.”

For instance, the benchmark 10-year Treasury notes currently yield about 1.70%.

“Payout rates, which historically average 52%, remain near their lows at 34%,” Silverblatt added. “At this point, we expect to see double-digit growth in actual dividend payments for the fourth quarter of 2012 and a potential double-double gain in 2013 – depending on Washington.”

Romney has openly stated that he will maintain bush-era taxes and keep rates on dividends at a cap of 15%, whereas dividend tax rates could jump to 43% under Obama. [Dividend ETFs, the Fiscal Cliff and Potential Tax Hikes]

Some dividend ETFs include:

  • iShares Dow Jones Select Dividend Index Fund (DVY) : 3.49% yield
  • iShares High Dividend Equity Fund (HDV) : 3.22% yield
  • SPDR S&P Dividend ETF (SDY) : 3.16% yield
  • Vanguard Dividend Appreciation ETF (VIG) : 2.08% yield
  • Vanguard High Dividend Yield Index Fund (VYM) : 2.93% yield
  • WisdomTree Dividend Top 100 Fund (DTN) : 3.60% yield

For more information on dividend payers, visit our dividend ETFs category.

Max Chen contributed to this article.

Full disclosure: Tom Lydon’s clients own DVY.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.