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Dividend Growth ETFs Are Great Bets: Here's Why

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The hunt for dividend in the equity market is always steady irrespective of how it is behaving. After all, who doesn’t like a steady stream of current income along with capital gains? And if investors are caught in the web of equity market uncertainty and global growth worries, the lure for dividend investing increases.

Investors should note that not all dividend stocks serve the same purpose. While the high-yield ones are known for offering a hefty current income, stocks with dividend growth point to quality investing — a pre-requisite to making money in this volatile environment. These companies — known as dividend aristocrats — are usually good for value investing and in demand when volatility flares up.

Below we highlight a few reasons that tell you why this is the time to invest in dividend growth ETFs.

Companies Are Raising Dividends

Wells Fargo, Cintas, and Hershey were among the many large U.S. companies that have raised dividends lately, per a barrons.com article. Other renowned companies that have announced dividend hikes lately were Truist Financial, Mondelez International, McKesson, Marathon Oil, Principal Financial Group, Ball, Skyworks Solutions and Republic Services. Oil giant BP upped dividend and confirmed share buybacks while banking giant Standard Chartered resumed dividends and buybacks.  

Howard Silverblatt, senior index analyst from S&P Global Indices expects the overall dividend payout for the S&P 500 to increase 5% in 2021, per the CNBC article. That would take the total payout to about $515 billion, up from $483 billion in 2020. This makes it intriguing to bet on the dividend ETFs (read: Dividend Hikes Are Back: Buy These ETFs).

Rising Fear for Delta Variant = Rising Uncertainty

The world’s largest economy is witnessing a surge in the number of new delta variant cases in 49 states. This fear has weighed on the broader market last week.On a different note, the U.S. GDP grew at a 6.5% annualized rate in the second quarter of 2021, per the Commerce Department’s first estimate (as mentioned in a CNBC article). However, the metric lagged the Dow Jones estimate of 8.4%. Both factors strengthened the bet for investing in dividend ETFs, which are considered relative safer investing options.

Against this backdrop, below we highlight a few dividend aristocrat ETFs that could be intriguing picks at the current level.

ETFs in Focus  

SPDR S&P Dividend ETF (SDY)

The underlying S&P High Yield Dividend Aristocrats Index measures the performance of the highest dividend yielding S&P Composite 1500 Index constituents that have followed a managed-dividends policy of consistently increasing dividends every year for at least 20 consecutive years. The fund charges 35 bps in fees and yields 2.64% annually (read: 5 Dividend ETFs Hovering at Record High).

ProShares S&P 500 Dividend Aristocrats ETF (NOBL)

The underlying S&P 500 Dividend Aristocrats Index targets companies that are currently members of the S&P 500, have increased dividend payments each year for at least 25 years, and meet certain market capitalization & liquidity requirements. The fund charges 35 bps in fees and yields 1.90% annually (read: Try Dividend Aristocrat ETFs to Fight Rising Delta Variant Woes).

Siren DIVCON Leaders Dividend ETF (LEAD)

The underlying Siren DIVCON Leaders Dividend Index capitalizes on the theory that, over time, companies that consistently grow their dividends tend to have investment returns above overall market returns and companies that do not grow their dividends tend to have investment returns below overall market returns. The fund charges 43 bps in fees and yields 0.75% annually.

O'shares FTSE US Quality Dividend ETF OUSA

This one is a quality pick as the underlying index chooses stocks with strong balance sheets and profitability. The fund charges 48 bps in fees and yields 1.62% annually.

Invesco Dividend Achievers ETF PFM

The underlying NASDAQ US Broad Dividend Achievers Index is designed to identify a diversified group of dividend-paying companies which have increased their annual dividend for 10 or more consecutive fiscal years. It charges 53 bps in fees and yields about 1.60% annually.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
SPDR S&P Dividend ETF (SDY): ETF Research Reports
Invesco Dividend Achievers ETF (PFM): ETF Research Reports
Oshares U.S. Quality Dividend ETF (OUSA): ETF Research Reports
Siren DIVCON Leaders Dividend ETF (LEAD): ETF Research Reports
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