S&P 500 dividend growth is slowing, but that does not mean stocks with consistently rising payouts and the exchange traded funds that focus on those names should be eschewed by income investors in 2017. Quite the contrary as the current market environment, including rising interest rates, could be suitable to quality dividend growers.
One of the ETFs that delivers access to the dividend growers is the iShares Core Dividend Growth ETF (NYSEArca: DGRO), specifically targets companies that pay a qualified dividend, must have at least five years of uninterrupted annual dividend growth and their earnings payout ratio must be less than 75%.
DGRO tracks the Morningstar US Dividend Growth Index. One of that index’s mandates is that constituent firms have a minimum of five years of uninterrupted dividend growth. For example, the Morningstar US Dividend Growth Index does not include companies with yields that rank in the top 10% of the eligible inclusion universe and only companies with a payout ratio of less than 75% can be included, according to Morningstar.
DGRO’s emphasis on dividend consistency “makes for an attractive fundamental tailwind and commitment to returning business gains to shareholders. DGRO is a multi-sector, multi-market cap index comprised of 425 U.S. stocks with consistent year-over-year dividend growth. The fund currently sports a 30-day SEC yield of 2.59% and income is paid quarterly to shareholders,” reports ETF Daily News.
Earlier this year, iShares lowered the annual fee on DGRO to 0.08%, or $8 on a $10,000 investment, making it one of the least expensive dividend ETFs on the market.