Dividend exchange traded funds have been all the rage lately, which isn’t surprising since S&P 500 dividends are yielding more than the 10-year Treasury note.
Conservative, income-focused investors are venturing into new areas with bond interest rates so low and bank accounts yielding essentially zero. [Dividend ETFs in Focus as S&P 500 Yield Exceeds 10-Year]
On a quarter-end basis, the dividend yield on the S&P 500 has exceeded that for the 10-year Treasury note only 20 times since 1953, said Sam Stovall, chief investment strategist at Standard & Poor’s Equity Research.
“The good news is that in the following 12 months, the S&P 500 rose by an average 20%,” he wrote in a note Monday. “The bad news is that past performance is no guarantee of future results.”
Furthermore, companies are increasing dividends with the 500 largest U.S. companies raising their dividend payout at the fastest rate in seven years. Companies are sitting on lumps of cash as they have kept payrolls down and cut costs over the past few years. [Dividend ETFs Set to Benefit From Higher Payouts]