Investors may also consider consistent dividend growers as a way to gain exposure to this group of quality companies as dividend growers and high quality stocks share a number of similar characteristics.
Related: 4 Dynamic Smart Beta ETF Core Strategies to Better Manage Risk
Companies that have consistently increased dividends tend to be high in quality and show a strong potential for growth. These dividend growers have been able to withstand periods of market duress, exhibiting smaller drawdowns as investors sold off riskier assets, while still delivering strong returns on the upside, to generate improved risk-adjusted returns over the long haul.
“In the case of Vanguard, they recognize this and they apply some additional proprietary screens to try to weed out companies that are not likely to be able to sustain their dividend growth. Unfortunately, there’s not a lot of transparency behind those,” according to Morningstar.
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