Global dividend growth slowed in the third quarter and with the Federal Reserve poised to raise interest rates for the first time in 2016 later this month, some investors could be skittish about dividend stocks and exchange traded funds.
Those scenarios remind income investors that being selective is key when evaluating dividend ETFs. Stocks with steady yields reassure investors of a company’s strong financial health.
Additionally, dividend-paying stocks typically outperform those that do not pay over the long haul, with less volatility, due to the compounding effect of dividends on the investment’s overall return.
Over the past 40 years, companies that boost payouts have proven to be less volatile than their counterparts that cut, suspended or did not initiate or raise dividends.
Quality, dividend-paying stocks and exchange traded funds have been among the best performers this year as investors turned to a relatively undervalued segment of the market following the sell-off in growth stocks. The Vanguard Dividend Appreciation ETF (NYSEArca: VIG) remains a solid idea for dividend investors in 2017.