Dividend exchange traded fund investors should look at their exposure to rate-sensitive sectors and consider switching over to dividend growth leaders.
In a rising rate environment, ETFs with high exposure to utilities, telecom services and real estate investment trusts could run into trouble, writes Neena Misha for Zacks. On the other hand, technology and finance sectors perform during cyclical expansions and have been increasing their dividends. [ETFs for Rising Dividends]
S&P research revealed that dividend net increases was up $17.6 billion in the second quarter, with 591 reported dividend increases, up 17% year-over-year. [Dividend ETFs: The ‘Bondification’ of the Stock Market]
Markit projects that S&P 500 dividends in the second half of 2013 will rise 13% year-over-year, with tech stocks leading the dividend payouts, followed by oil & gas and banks.
According to WisdomTree, tech stocks have made up over 54% of dividend increases in the past five years while financials accounted for the biggest dividend growth in the last three years.
Given the current growth environment, many companies are opting to return excess cash to shareholders, instead of putting the money into large scale projects or M&A activities. [Right Place, Right Time For New Dividend ETF]