Most dividend-related strategies select companies based on past or historical trends. Instead, investors may consider a forward looking dividend exchange traded fund to access stocks that are more likely to raise dividends ahead.
“Looking at alternatives?” Eric Ervin, President and CEO of Reality Shares, asked ETF Trends. “Reality Shares has a model which looks at companies based on their ability to grow dividends in the future, not based on their past dividend growth.”
Specifically, Reality Shares has recently brought out a suite of ETFs that focus on U.S. companies expected to raise dividends ahead, including the Reality Shares DIVCON Leaders Dividend ETF (BATS: LEAD), Reality Shares DIVCON Dividend Defender ETF (BATS: DFND) and Reality Shares DIVCON Dividend Guard ETF (BATS: GARD).
The DIVCON suite includes a “fund family of ETFs invested in the dividend growth of the broad market, and also those stocks most likely to increase their dividends while avoiding (or sometimes capitalizing on) those stocks more likely to cut their dividends,” according to a Reality Shares research note.
The group of DIVCON ETFs is not your traditional dividend strategy. For instance LEAD will try to reflect the performance of the Reality Shares DIVCON Leaders Dividend Index, which is comprised of high-quality large-cap U.S. companies with the highest probability of increasing dividends within a year, based on Reality Shares’ proprietary DIVCON dividend health scoring system.
SEE MORE: A Different Type of Dividend Growth ETF
In the 15 year period between January 2000 and December 2015, 97% of companies selected through the DIVCON scoring methodology has increased dividends. Year-to-date, 55% of LEAD’s holdings raised dividends with no cuts, whereas 36% of S&P 500 companies have raised dividends with 2.9% cutting dividends.[related_stories]