Dividend stock exchange traded funds have outpaced other investment styles and could remain a strong strategy ahead.
Over the past year, the WisdomTree MidCap Dividend Fund (NYSEArca: DON) increased 24.0%, Vanguard High Dividend Yield ETF (NYSEArca: VYM) gained 20.1%, PowerShares Dividend Achievers Portfolio (NYSEArca: PFM) rose 18.8% and iShares Core High Dividend ETF (NYSEArca: HDV) advanced 20.6%.
DON has a 2.43% 12-month yield. VYM has a 2.86% 12-month yield. PFM has a 2.0% 12-month yield. HDV has a 3.27% 12-month yield.
“Over the past 12 months, dividend yield as a style has outperformed in all markets apart from Japan,” Credit Suisse analysts led by Andrew Garthwaite said, according to CNBC. “In the euro area, U.K. and U.S., dividend indices outperformed their wider markets by 3.8 percent, 5.6 percent and 3.1 percent, respectively.”
Looking at a Europe dividend stock ETF, the First Trust STOXX European Select Dividend Index Fund (NYSEArca: FDD) rose 6.4% over the past year while the iShares MSCI EMU ETF (NYSEArca: EZU) dipped 0.2%.
FDD has a 4.23% 12-month yield.
Credit Suisse analysts were leaning more toward European dividend plays as the European Central Bank’s looser monetary policy would keep yields low and help make dividend-paying stocks more attractive for income-minded investors.
Additionally, Credit Suisse pointed to six factors that could support dividend stocks ahead: The low yield environment. Regulatory easing. Reasonable valuations for dividend stocks. Rising inflows to high-dividend funds. Strong earnings trends for the group. Lastly, the higher likelihood that European companies will start allocating more to dividends than U.S. companies. [U.S. Dividend ETFs Could Outperform in Low-Yield Environment]
For instance, several companies, including General Motors (NYSE: GM) and 21s Century Fox (NasdaqGS: FOXA), have raised dividends recently. Dividend stocks expanded annualized cash payments by over 10% in January. Howard Silverblatt, senior index analyst at S&P Dow Jones Indices, also pointed out that February is typically the biggest month for dividend hikes and banks should announce dividend changes in March. [Banner Year of Dividend Growth Sends Cash to Dividend ETFs]
For more information on dividend stocks, visit our dividend ETFs category.
Max Chen contributed to this article.