Payouts Rise in Q1, but Some Dividend ETFs Lag

Dividends paid by S&P 500 member firms continued rising during the first quarter, but some of the major dividend exchange traded funds did not follow suit.

With just two days remaining in the first quarter, S&P 500 companies have paid out $93.6 billion in dividends, up 14% from the year-earlier period, marking the fourth consecutive quarter S&P 500 dividends have touched an all-time high, reports Michael Vallo for Barron’s.

Those increased payouts have not had much impact on the four largest dividend ETFs. The Vanguard Dividend Appreciation ETF (NYSEArca: VIG), iShares Select Dividend ETF (NYSEArca: DVY), SPDR S&P Dividend ETF (NYSEArca: SDY) and the Vanguard High Dividend Yield ETF (NYSEArca: VYM) have all traded lower to start 2015 even as the S&P 500 is higher by half a percent. [Buying Opportunity With a Favored Dividend ETF]

DVY has been especially hard hit, losing 1.7% as none of its aforementioned peers have lost more than 1%. While the $14.9 billion DVY, which yields 3% on a trailing 12-month basis is home to plenty of stocks that have raised and will raise dividends in the coming months, the ETF’s substantial utilities exposure is proving problematic. The ETF allocates nearly 32.6% of its weight to utilities stocks, almost triple its second-largest sector weight, and that is not a positive trait at a time when interest rate hike fears have the utilities sector ranking as the worst group in the S&P 500.

Lagging utilities stocks do not explain the woes encountered by all dividend ETFs. For example, VIG, the largest U.S. dividend ETF, has traded lower this year despite allocating less than 1% of its weight to utilities names. [Consistent Dividend ETFs]

More dividend increases are expected in the second quarter, but some investors are not waiting around to see how that affects the aforementioned dividend ETFs. Howard Silverblatt, senior index analyst at S&P Dow Jones Indices told Barron’s the second quarter will easily beat the first in terms of dividends paid. Silverblatt also noted May is a fertile period for dividend increases.

However, investors have pulled nearly $750 combined from DVY, SDY and VIG this year. VYM has added over $531 million in new assets.