ETF Trends
ETF Trends

The third quarter was another good one of U.S. dividend growth with dividend (increases less decreases) totaling $12.3 billion, up from $11.9 billion a year earlier, according to S&P Dow Jones Indices.

“For the 12-months ending September 2014, dividend payments have increased by 27.4%, or $55.5 billion, compared to an increase of $43.6 billion in the 12-months ending September 2013,” said the index provider in a statement.

With ongoing U.S. dividend growth has come accelerating growth for dividend exchange traded funds. During the third quarter, of the four largest U.S. dividend ETFs, only the Vanguard Dividend Appreciation (NYSEArca: VIG) saw outflows. VIG, the largest dividend ETF, lost $178.2 million, but that was canceled out by the nearly $180 million investors allocated to the SPDR S&P Dividend ETF (NYSEArca: SDY). [Different Dividend ETFs for Different Income Investors]

The Vanguard High Dividend Yield ETF (NYSEArca: VYM) and the iShares Select Dividend ETF (NYSEArca: DVY) took in over $813 million combined during the July through September period.

“The good news continued for dividends in the third quarter, as the increase in the declared (announced) indicated rate is close to hitting a double-digit, year-to-date gain,” says Howard Silverblatt, Senior Index Analyst at S&P Dow Jones Indices. “Given the number of those issuers which have a history of Q4 dividend increases, 2014 should post another double-digit gain. Along with the permanent lower tax rate on qualified dividends, investors will feel like they are getting a raise.”

Over 84% of S&P 500 member companies and all 30 firms in the Dow Jones Industrial Average were dividend payers in the third quarter and “Silverblatt found that 67.5% and 51.2% of issues within the S&P MidCap 400 and S&P SmallCap 600 respectively, pay dividends, both up from 66.8% and 50.2% in Q2,” according to S&P Dow Jones Indices.

Not only are small-cap dividends on the rise, but ETFs that focus on smaller, dividend-paying stocks have been noticeably less bad than their non-dividend counterparts. For example, the WisdomTree SmallCap Dividend Fund (NYSEArca: DES) is off 4.4% this year while the iShares Russell 2000 ETF (NYSEArca: IWM) is lower by 6.3%. [Small-Cap Dividend ETFs Prove Less Bad]

The chasm between dividend-paying and dividend-growing mid-caps and their non-dividend equivalents is even more pronounced. The WisdomTree MidCap Dividend Fund (NYSEArca: DON), which through the first half of this year was topped by just four other WisdomTree ETF, is up 4% year-to-date compared to a 1% gain for the S&P MidCap 400 Index. [Mid-Cap Dividend ETFs Keep Shining]

“On a sector basis, using the S&P 1500 as the benchmark for U.S. domestic common issues, Silverblatt noted that 1,000 issues now pay regular cash dividends, up from 990 at the end of Q2, with Financials and Industrials both adding 4 issues during Q3. 89.9% of the issues in Financials sector paid a cash dividend, compared to only 38.6% of the Technology sector,” according to S&P Dow Jones Indices.

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