Dividend exchange traded funds have become a key component holding for many investors, especially for those looking for that extra bit of cash on the side.
Dividend ETFs specifically pick out companies known for their dividend yields, but among the ETF universe, the markets may be further broken down into more focused sections, depending on style or investment strategies.
While the performance of the S&P 500 may be higher than most dividend ETFs so far this year, the payout ratios may begin to rise and make up the difference, reports David Wilson for Bloomberg. [Is There a Bubble in Dividend ETFs?]
The S&P 500 Dividend Aristocrats Index, comprised of companies that have raised dividends over the past 25 years or more, has gained 4.2% year-to-date, lagging the S&P 500’s increase.
According to Gina Martin Adams, strategist at Wells Fargo Securities, dividends equal 27% of S&P 500 earnings, the lowest levels in over 100 years. Looking ahead, dividends will be in greater demand as financial deleveraging is accompanied by slower earnings growth and an aging population that favors yields. [Can Dividend ETFs Sustain Their Performance?]