Dividend exchange traded funds have helped investors generate attractive long-term returns. However, investors may want to pare down expectations as dividend growth could slow ahead.
While S&P 500 dividend payouts continue to set records, the pace of dividend growth has decelerated, with companies less keen to pump shareholder returns in light of a global slowdown, the Financial Times reports.
According to S&P Dow Jones Indices, S&P 500 average dividend has increased 13.5% so far this year, compared to a 17.3% rise last year.
As economic growth slows and observers downgrade earnings forecasts, company cash payouts, along with stock buybacks, have also lessened.
“We’re not seeing many of the dividend increases we’d see in the past,” Jack Ablin, chief investment officer of BMO Private Bank, told CNBC. “Part of it was companies hoarding cash and it finally took someone like Carl Icahn to shake up Apple and get something moving. But left to their own devices, company management really does not want to stick their neck out.”
Nevertheless, many dividend stocks and related ETFs are attracting renewed interest as the markets speculate the Federal Reserve will push back on its first interest rate hike in almost a decade. [Low-Yield Environment]