As the value investment style comes back to the forefront, dividend growth exchange traded funds have been among the best performing strategies.
For instance, the ProShares Russell 2000 Dividend Growers ETF (NYSEArca: SMDV) has returned 8.4% as of March 31, the best performer among 794 small-cap related mutual funds and ETFs, according to Lipper data. In comparison, the Russel 2000 Index dipped 1.8%.
The ProShares Russell 2000 Dividend Growers ETF tracks the Russell 2000 Dividend Growth Index. The underlying index includes small-cap firms with dividend increase streaks of at least a decade. SMDV shows a 2.15% 30-day SEC yield.
The ProShares S&P MidCap 400 Dividend Aristocrats ETF (NYSEArca: REGL) was the second best performer among 410 mid-cap mutual funds and ETFs, returning 9.2% over the same period. Meanwhile, the S&P MidCap 400 Index rose 3.4%.
The ProShares S&P MidCap 400 Dividend Aristocrats ETF tracks the S&P MidCap Dividend Aristocrats Index, which only includes dividend paying companies that have raised payouts for 15 consecutive years. REGL has a 1.82% 30-day SEC yield.
Additionally, the ProShares S&P 500 Aristocrats ETF (NYSEArca: NOBL) was the fourth best performer among 867 mutual funds and ETFs, rising 6.4%. In contrast, the S&P 500 Index returned 0.8%.
The ProShares S&P 500 Aristocrats ETF follows the S&P Dividend Aristocrats Index, which is comprised of S&P 500 companies that have increased their dividends for at least 25 consecutive years. NOBL has a 2.16% 30-day SEC yield.
[related_stories]The three dividend growth ETFs may be a better way for investors to capture the three market capitalization asset categories. Among dividend paying companies, those that have consistently increased dividends are ranked among an elite group of dividend payers. In recent years, these companies that have steadily raised dividends also outperformed firms that did not.
For instance, looking at Russell 3000 companies between 1987 and the end of 2015, dividend growing companies returned an average 13.4%, whereas other dividend payers returned 11.9%, non-paying companies returned 7.1% and dividend cutters saw a 6.7% return. Financial advisors who are interested in learning more about dividend growth investments can watch the webcast here on demand.
Simeon Hyman, Head of Investment Strategy at ProShares, also pointed out that dividend growers include a high quality group of stocks that exhibit strong balance sheets and sustainable growth.
“Dividends are often viewed as a reflection of management confidence in the company’s earnings, balance sheet and performance potential,” Hyman said. “Cutting or suspending dividends is probably one of the things Wall Street hates the most, as it may be a signal of cash flow or debt problems for a company. Paying dividends is generally considered a sign of stability and a commitment from management to returning cash to their shareholders.”