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Dividend Growth ETFs to Sail Through Trade Uncertainty

Sweta Jaiswal, FRM

Beijing recently expressed its interest in conducting another round of talks before the ‘phase 1’ deal gets signed, per a Bloomberg report. The Chinese delegation is again expected to be led by Vice Premier Liu He. Analysts are of the opinion that China majorly intends to discuss tariff hikes of 15% on $160 billion Chinese exports, scheduled for implementation on Dec 15, along with other key issues (read: ETFs in Focus as Tariffs Hit Chinese Exports).

This latest development is raising questions over the successful completion of the truce deal. The deal was already being considered vague and ambiguous by analysts as it skipped discussions on certain ‘hard issues’ like Chinese government providing subsidies to industries and its role in the economy, Huawei ban along with Beijing’s restrictions on data transfers across its borders (read: Momentum ETFs in Focus on Trade Deal Optimism).

More on the Phase 1 Deal

The first phase of the deal aims at addressing issues related to safeguarding U.S. intellectual property rights, including force transfer or theft of technologies, reform of the Chinese financial markets and China’s practice of arbitrarily setting the foreign-exchange rate. Moreover, according to President Trump, Beijing has agreed to purchase $40-$50 billion worth of U.S. farm products.  

Moreover, the United States has decided to postpone the planned tariff increase of 5% on $250 billion of Chinese goods, mostly used as intermediaries for high-tech U.S. products, effective Oct 15 (read: ETFs to Buy on Phase 1 of U.S.-China Trade Deal).

Dividend Growth ETFs to Sail Smooth

The appeal for dividend ETFs has been rising among investors. This is especially true given the waning yields, easing monetary policy on the global front and market uncertainty triggered by trade gyrations, geopolitical worries and deceleration in global growth concerns. This is because dividend-paying securities are major sources of consistent income for investors when returns from equity markets are uncertain.

Although there are plenty of options in the dividend ETF world, ‘dividend aristocrats’ or ‘dividend growers’ could be the smartest way to brave the current market turmoil. Here are a few ETFs to consider:

Vanguard Dividend Appreciation ETF VIG

This is the largest and the most popular ETF in the dividend space with AUM of $38.86 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 183 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 $5.56 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 479 stocks in its basket, the fund has AUM of $8.75 billion. It charges 8 bps in fees per year and has a Zacks ETF Rank of 1 with a Medium risk outlook (read: Dividend Growth ETFs for Long Term Investors).

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 $846.7 million in its asset base. It has a Zacks ETF Rank of 2 with a Medium risk outlook (read: A Spread of Top Dividend Growth ETFs for Your Portfolio).

Invesco Dividend Achievers ETF PFM

With $307.3 million, this fund offers exposure to 260 companies that have raised 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.