The financial sector continues to lead the pack as a forerunner in performance rankings over the past few weeks, followed up by technology and healthcare, respectively. [Discount Brokers, Fund Firms Power Overlooked Financial ETF]
“Technology and Finance companies have been dividend growth leaders in the last few years. Technology companies currently have a lot of cash on their balance sheets and will continue to generate large amounts of cash going forward too. Finance companies have also been on the mend and many of them got Fed approval to raise dividends after passing stress tests,” Zacks Investment Research wrote.
The year-to-date best performing financial ETFs as of June:
- iShares Dow Jones US Financial Sector Index Fund (NYSEArca: IYF) up 18.30%
- SPDR Financial Select Sector Fund (NYSEArca: XLF) up 19.28%
- Vanguard Financials Index Fund (NYSEArca: VFH) up 17.77%
Earnings quality for the larger banks is expected to improve with time. Most of the poor earnings quality ratings are due to a loss of loan reserves.
The sector is slated to improve with healthier bank loan portfolios, expanding net interest rate margins, and bigger profits, reports Mishra. According to WisdomTree, the rising dividends and busy buyback activity has been contributing to the performance of the sector and is anticipated to continue in the near future. [The Case for Financial Sector ETFs: Morningstar]
Tisha Guerrero contributed to this article.