With the Dow Jones Industrial Average at an all-time high, Corporate America is in better shape than the average American after the financial crisis. Companies are seeing profits rise and firms are returning cash to investors at a record pace, which has provided a lift to ETFs that specialize on dividends and share buybacks.
S&P 500 companies are projected to pay out at least $300 billion in dividends over 2013, compared to the $282 billion dished out last year, fueling the market rally that has pushed the Dow and the S&P 500 to records, the Wall Street Journal reports.
Some of the largest dividend ETFs include:
- Vanguard Dividend Appreciation ETF (NYSEArca: VIG): 2.21% 12-month yield
- iShares Dow Jones Select Dividend Index Fund (NYSEArca: DVY): 3.47% 12-month yield
- SPDR S&P Dividend ETF (NYSEArca: SDY): 3.02% 12-month yield
Meanwhile, U.S. companies also plan to buy back $117.8 billion in their own shares in February, the largest monthly total on record dating back to 1985.
Buybacks help boost a company’s earnings-per-share ratio through reducing shares outstanding.
Investors can take a look at the PowerShares Buyback Achievers Portfolio (NYSEArca: PKW), which has garnered an impressive five-year annualized return of 8.5%, compared to the S&P 500 at 4.8%. The TrimTabs Float Shrink ETF (NYSEArca: TTFS) is an actively managed fund that focuses on companies that lower the number of shares outstanding. [Buyback ETF’s Five-Year Return Creaming the S&P 500]
Additionally, after 17 of 18 largest banks passed the Fed’s “stress tests,” several banks are also moving to boost dividends and share buybacks. [Dividend and Buyback ETFs: A Match Made in Heaven?]