By Todd Rosenbluth, CFRA
The S&P 500’s 9.3% total return in the first half of 2017 was driven by sectors with below-average dividend yields, while higher-income-generating sectors lagged behind. Indeed, non-dividend-paying stocks across all sectors in the benchmark had an 8.8% total return, stronger than the 7.6% gain for dividend payers. Nonetheless, the second quarter of 2017’s $104 billion in dividend payments by S&P 500 constituents, up from 7.4% from a year earlier, serves as a reminder that dividend growth has persisted.
The more economically sensitive technology and consumer discretionary sectors contributions to the S&P 500’s indicated dividend rate has climbed to 15.5% and 9.0%, respectively, at the end of June 2017, up from 14.7% and 8.1% at the end of 2012. In the first half of 2017, the S&P 500 technology (up 17%) and consumer discretionary (up 11%) sectors were among the top total return performers.
While most dividend ETFs covered by CFRA are trailing the 11.7% year to date return for the S&P 500 index, CFRA’s Overweight ranked WisdomTree US Quality Dividend Growth Fund (DGRW) is a bright spot rising 13.3% over the same time horizon. Relative to other dividend-growth ETFs, some of which we will highlight below, DGRW contains more exposure to technology (20%) and consumer discretionary (17%) assets in the portfolio through May.
While DGRW has performed well this year, it’s what’s inside the fund that CFRA likes. CFRA Strong Buy recommended Apple (AAPL), Buy recommended Home Depot (HD) and Buy recommended McDonald’s (MCD) are among the top holdings in these sectors.