By Todd Rosenbluth, CFRA
Investors added $4.5 billion of new money to dividend-focused ETFs in the third quarter of 2019 as the relative stability these funds offer was in demand amid a risk-off environment in August, while the capital appreciation aspect supported continued interest during the risk-on September. According to S&P Dow Jones, there were 426 dividend increases in the third quarter of 2019, down from 460 a year earlier. Meanwhile, this year there were 94 decreases, up from 67. The narrowed dividend breadth highlights the benefits of an ETF’s diversification.
ProShares S&P 500 Dividend Aristocrats (NOBL) tracks the S&P 500 Dividend Aristocrats Index, holding 58 companies, including DOV and FRT, that have raised their dividend for 25 consecutive years. Consumer Staples (23% of assets) and Industrials (22%) were recently the largest sectors represented in the $5 billion ETF, according to First Bridge Data.
Investors that want an all-cap dividend product should consider the $18 billion S&P Dividend (SDY), which holds 113 large-, mid- and small-cap companies in the S&P 1500 Index. To make it into the index and the fund, companies need to raise dividends 20 years in a row; two firms that have done so are AT&T (T) and Leggett & Platt (LEG). Industrials (17% of assets) and Consumer Staples (15%) were the largest sectors here too, but the weightings are lower than in NOBL. Meanwhile, SDY’s stake in Utilities (11%) was much higher than NOBL’s (2%).
While NOBL and SDY rely on historical dividend growth to support inclusion, Reality Shares DIVCON Leaders Dividend (LEAD) uses a proprietary model to identify companies with a high likelihood to increase dividends in the next 12 months due to an evaluation of its earnings per share growth, its free cash flow and other metrics. Information Technology (24% of assets) and Industrials (20%) are the largest sectors, with Lam Research (LRCX) and Cintas (CTAS) among the holdings. LEAD is smaller than its peers and trades with a wider bid/ask spread.
Todd Rosenbluth is Director of ETF & Mutual Fund Research at CFRA.
newETFs.io respects the hard work of others and gives all credit to the remarkable folks at ETFTrends.com. This excerpt/article was pulled from their RSS feed; click here to view the original. Please note that on occasion, the RSS feed will not have the author. When this happens this site defaults the author to "News". Make no mistake, this excerpt/article was not created by newETFs.io, it was simply shared with you.
