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Dividend Growth ETFs to Grab Amid Rising Geopolitical Risks

Sweta Jaiswal, FRM

Ever since the drone attacks on Saudi Arabia’s crude facilities took place, the geopolitical risks have intensified. In fact, per a Bloomberg’s article, Goldman Sachs Group Inc. president and chief operating officer John Waldron has also acknowledged the aggravating political and geopolitical issues globally and commented, “the risk premium on politics and geopolitics is elevating. For a long time, post financial crisis, we actually had a pretty modest amount of risk premium in the marketplace around the broad category of geopolitics, and that’s starting to change” (read: Top & Flop ETFs of Last Week).

Let’s weigh the factors that are inciting the geopolitical risk scenario.

Sino-US Trade War Ambiguity

White House’s adviser on China policy Michael Pillsbury recently commented that President Donald Trump might escalate trade tensions further by increasing existing tariffs if no deal is made. Meanwhile, Trump has also stated at the United Nations General Assembly that a “bad deal” in trade negotiations will not be agreed upon. Meanwhile, China’s top official has also toughened his tone and said that Beijing will not entertain or permit any threat or interference in its matters. Moreover, some analysts don’t see a trade deal happening before 2020 US presidential elections (read: ETFs in Focus as Deputy-Level U.S.-China Trade Talks Begin).

Middle East Conflict Gathers Steam

The controversies regarding Iran’s involvement in the Saudi Arabian drone strikes have heated up the geopolitical risks in the Gulf region. Notably, Yemen’s Houthi rebels have owned responsibility for the attacks. However, per a Reuters article, Saudi Arabia has expressed concerns over the utilization of Iranian weapons to carry out the raids. Moreover, secretary of state Michael Pompeo blamed Iran for this disruption while the allegation was rejected by Tehran. In fact, U.K. Prime Minister Boris Johnson has also put the onus on Iran for the attack (read: Leveraged Oil & Energy ETFs to Play on Saudi Attack).

However, Iran continues to deny its role in the drone attacks and has warned of a possible “all-out war” if any retaliatory action is taken against the country.

Meanwhile, Trump regime recently announced plans to tighten security in Saudi Arabia and the United Arab Emirates by sending more officials and missile defense equipment. However, Iran’s president recently called out for Western powers to let the regional nations led by Tehran oversee the security of the Persian Gulf.

Brexit Suspense Adds to the Woes

Eurozone economy has been going down a rocky road as third-quarter end approaches on falling demand for goods and services. The persistent global trade disputes and the prolonged process involving Britain’s exit from the European Union have been the primary reasons for this slowdown (read: Eurozone ETFs in Focus on Weak PMI Data).

Dividend Growth ETFs at Your Rescue

The appeal for dividend ETFs has been surging this year on investors’ drive for juicy yields. This is especially true against the backdrop of waning yields, easing monetary policy on the global front and market uncertainty triggered by trade gyrations, geopolitical worries and deceleration concerns in global growth. This is because the dividend-paying securities are the major sources of consistent income for investors when returns from equity markets are in peril.

Although there are plenty of options in the dividend ETF world, zeroing in on the ‘dividend aristocrats’ or the ‘dividend growers’ could be the smartest way to sail through the current market volatility emanating from political and geopolitical hazards. Here are some ETFs that investors can consider:

Vanguard Dividend Appreciation ETF VIG

This is the largest and the most popular ETF in the dividend space with AUM of $38.41 billion. The fund follows the NASDAQ US Dividend Achievers Select Index, which is composed of high-quality stocks with a record of raising dividends every year. It holds 184 securities in the basket and charges 6 basis points (bps) in annual fees. VIG has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook (read: How to Profit From ETFs as Saudi Attack Unnerves Investors).

ProShares S&P 500 Aristocrats ETF NOBL

This product provides exposure to high-quality companies that have not just paid dividends but hiked the same for at least 25 consecutive years with most doing so for 40 years or more. It follows the S&P 500 Dividend Aristocrats Index, holding 57 securities in its basket. NOBL has amassed $5.49 billion in its asset base. It has an expense ratio of 0.35% and has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook (read: ETF Strategies to Follow as Volatility Seems Underpriced).

iShares Core Dividend Growth ETF DGRO

This fund provides exposure to companies boasting a history of sustained dividend growth by tracking the Morningstar US Dividend Growth Index. Holding 478 stocks in its basket, the fund has AUM of $8.61 billion. It charges 8 bps in fees per year and has a Zacks ETF Rank of 1 with a Medium risk outlook (read: Red Hot Dividend ETFs of 2019).

First Trust NASDAQ Rising Dividend Achievers ETF RDVY

This fund lends exposure to a diversified portfolio of 51 companies with a stellar dividend payout history. It tracks the NASDAQ US Rising Dividend Achievers Index, charging investors 50 bps in annual fees. The ETF has accumulated $832 million in its asset base. It has a Zacks ETF Rank of 2 with a Medium risk outlook.

Invesco Dividend Achievers ETF PFM

With $307 million, this fund offers exposure to 260 stocks that have increased annual dividends for 10 or more straight fiscal years. It has expense ratio of 0.54%. PFM has is Zacks #2 Ranked ETF  with a Medium risk outlook.

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Vanguard Dividend Appreciation ETF (VIG): ETF Research Reports
 
iShares Core Dividend Growth ETF (DGRO): ETF Research Reports
 
ProShares S&P 500 Dividend Aristocrats ETF (NOBL): ETF Research Reports
 
Invesco Dividend Achievers ETF (PFM): ETF Research Reports
 
First Trust Rising Dividend Achievers ETF (RDVY): ETF Research Reports
 
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