A New Dividend-Growth ETF (TBG) Hits the Market
Dividend investing remains a popular strategy for investors amid volatility and uncertainty. Although the latest inflation reading came in favorable for markets and the economy, the battle against inflation is far from over. We are yet to see substantiated cooling in inflation.
Against this time of uncertainty, dividend growth investing should rule. Probably this is why, a new ETF, namely TBG Dividend Focus ETF TBG, has been launched lately. Let’s delve a little deeper.
Inside TBG
The TBG Dividend Focus ETF seeks to generate long-term growth and capital appreciation and sustainable premium income by investing in a concentrated portfolio of publicly traded companies that are repeatedly growing their dividends. This ETF is active and does not track a benchmark.
The strategy deploys quantitative and qualitative measures to assess dividend sustainability and the likelihood of distribution growth over time. Free Cash Flow, Balance Sheet strength, and Management Alignment are key constituents of the fund’s analysis.
TBG generally invests in 25 to 35 small-, mid- and large-cap companies that are primarily U.S.-based. No stock accounts for more than 4.79% of the fund. The fund offers an extremely diverse approach of sectors. The fund charges 59 bps in fees.
How Does It Fit In a Portfolio?
Dividend aristocrats or dividend growth stocks are blue-chip dividend-paying companies with a long history of increasing dividend payments year over year. These generally act as a hedge against economic uncertainty and provide downside protection by offering outsized payouts or sizable yields on a regular basis. Additionally, aristocrats tend to skew the portfolio to less-volatile sectors and mature companies.
These stocks have superior fundamentals that make dividend growth a quality and promising investment for the long term. These companies have a sustainable business model, a long track of profitability, rising cash flows, good liquidity, a strong balance sheet and some value characteristics. Further, a history of strong dividend growth indicates a likely hike in the future.
Investors should note that the dividend aristocrat funds offer more dividend growth opportunities compared to the other products in the space but might not necessarily have the highest yields. Further, these products lead to a healthy portfolio with a greater scope of capital appreciation as opposed to the simple dividend-paying stocks or those with high yields.
Competition
There is stiff competition in the dividend growth investing space. However, the prominent ones are mainly large-cap in nature. These include,ProShares S&P 500 Dividend Aristocrats ETF NOBL, SPDR S&P Dividend ETF SDY and Vanguard Dividend Appreciation ETF VIG. These funds charge 35 bps, 35 bps and 6 bps in fees, respectively. In contrast, the actively-managed newbie’s expense ratio is quite high. But then, the newbie covers a wide spectrum of capitalization as well as gives a vast sectoral exposure.
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SPDR S&P Dividend ETF (SDY): ETF Research Reports
Vanguard Dividend Appreciation ETF (VIG): ETF Research Reports
ProShares S&P 500 Dividend Aristocrats ETF (NOBL): ETF Research Reports
TBG Dividend Focus ETF (TBG): ETF Research Reports
