The second quarter was another solid one for U.S. companies on the dividend front although dividend growth ebbed a bit.
Dividend increases among U.S. companies rose $12.6 billion in the April through June time frame, but that lags the $17.6 billion growth rate seen in the first quarter, according to S&P Dow Jones Indices. According to S&P Dow Jones Indices, 696 dividend increases were reported during the second quarter of this year compared to the 591 increases which were reported during the second quarter of last year. For the first half of 2014, 1,774 issues increased their payments, up 15.6% from the 1,535 issues that increased their payments during the first half of 2013.
“The good news is that the number of dividend increases was strong again in Q2, as the 696 increases were the most since 1979,” says Howard Silverblatt, Senior Index Analyst at S&P Dow Jones Indices. “The bad news is that the growth rate of actual aggregate cash payments has slowed, even as dividends continue to set record payments.”
Even with the slowdown in dividend growth, dividend exchange traded funds remain popular with investors. Interestingly, those ETFs that emphasize payout growth in some form as part of their weighting methodology still captured inflows and delivered solid returns in the second quarter even as dividend growth slowed. [Dividend Growth With ETFs]
The Vanguard Dividend Appreciation (NYSEArca: VIG), the largest U.S. dividend ETF, hauled in $755.5 million last quarter. VIG’s yield is in the neighborhood of the S&P 500’s and well below that of 10-year Treasuries, but the ETF has gained a cult-like following for its emphasis on quality stocks with minimum dividend increase streaks of at least 10 years. While VIG’s yield does not awe, its lineup is home to some of the safest dividend stocks in terms of those companies’ ability to continue paying and growing dividends. [Dividend ETFs With Safe Dividends]
The Schwab US Dividend Equity ETF (NYSEArca: SCHD), a direct competitor to VIG and the one dividend fund that is less expensive than the Vanguard offering, saw second-quarter inflows of $234 million.
Like VIG, SCHD’s holdings have dividend increase streaks of at least a decade. SCHD’s underlying index focuses on other quality factors such as return on equity, cash flow to debt ratios, dividend yield and five-year dividend growth. SCHD’s top-10 holdings include Johnson & Johnson (NYSE: JNJ), Procter & Gamble (NYSE: PG) and Coca-Cola (NYSE: KO), companies with three of the longest dividend increase streaks in the U.S. [The Rise of the Schwab Dividend ETF]
Some dividend ETFs that debuted last year saw their followings grow in the second quarter. The WisdomTree U.S. Dividend Growth Fund (NasdaqGM: DGRW), which is now 14 months old, added almost $10 million in new assets last quarter and rose 3.2%, hitting a series of new all-time highs along the way.