Dividend growing companies have historically outperformed with lower volatility.
Investors can gain exposure to this group of market through an alternative dividend-themed exchange traded fund strategy.
On the recent webcast (available on-demand), ETF Bond Alternative with No Rate Risk, Eric Ervin, President and CEO of Reality Shares, pointed out that investors are currently in a challenging market environment, with historically low interest rates in bonds, uncertainty in alternative strategies and heightened market volatility.
However, investors can potentially enhance returns by focusing on dividend growers. S&P 500 dividends have increased 40 of 43 years since 1973, and dividends accounted for over 50% of total equity returns since 1930.
By isolating dividend growth as a fixed income replacement, investors can capture capital appreciation while being exposed to low correlation and low drawdowns across a variety of market environments, Ervin said.
“We offer a range of ETFs pinpointing and capitalizing on the benefits of dividend growth and investment in the stocks most likely to increase their dividends while avoiding those more likely to cut their dividends,” Ervin said.[related_stories]
To tap into the benefits of dividend growers, investors may consider the Reality Shares DIVS ETF (NYSEArca: DIVY), which tires to provide exposure to the growth rate of expected dividends and looks to deliver long-term capital appreciation rather than income and yield through options contracts and dividend swaps.