An Active ETF With a Keen Eye on Dividend Growth | ETF Trends

Fixed income investors like dividends, but they like dividends that can stand the test of time even more. This is where the T. Rowe Price Dividend Growth ETF (TDVG) shines.

By utilizing an active management style, TDVG managers can seek out stocks that aren’t all about yield and yield alone. Staying power is what the fund looks out for — names that can sustain their dividends over time, while also having solid fundamentals.

The fund invests at least 80% of the fund’s assets in stocks that have a strong track record of paying dividends or are expected to pay dividends over time (even if not currently paying dividends), or futures that have similar economic characteristics. It primarily invests in exchange-traded securities that trade synchronously with the fund’s shares, cash, and cash equivalents.

The fund may also invest in ADRs and common stocks listed on a foreign exchange that trade on such exchanges synchronously with the fund’s shares. When appropriate, the portfolio manager may attempt to buy stocks when they are temporarily out of favor or undervalued by the market.

The fund has been a steady and consistent performer over time, giving long-term buy-and-hold investors reason to look at the fund more closely. Over a three-year window, the fund has produced a 31% gain.

TDVG Chart

Under the Hood

As of January 31, the two biggest allocations in the top 10 holdings in TDVG are comprised of heavy-hitters from the technology sector — namely, Apple and Microsoft, which both make up just over 10% of the fund combined.

Although the technology sector itself has taken a hit amid rising inflation, household names like Apple and Microsoft should be resilient enough to weather the storm and capture upside in any market landscape. The main point, of course, being that both companies can preserve their dividends over time.

Other names in the top 10 holdings come from the healthcare sector, with names like UnitedHealth Group and Danaher comprising close to 5% of the fund. Investors are expected to do well with healthcare, especially in the shadow of the pandemic.

The key focus of the fund is to provide structural growth trends inherent in a high growth strategy, while also maintaining low volatility and zeroing in on value. This includes holdings that focus their core business operations on electric vehicles, healthcare innovation, renewable energy, cloud computing, and digital payments.

An Eye on Growth

TDVG’s screening process maintains a keen eye on high-quality growth—in particular, companies exhibiting attractive valuations that include tangible metrics such as durable earnings growth, strong cash flow generation, and increasing dividends. Furthermore, intangible characteristics also come into play like strong management.

The fund presents investors with an ideal inflation hedge, especially for those looking to obtain more yield than assets such as safe haven government bonds. Furthermore, investors get the added benefit of price appreciation from q fund that contains durable companies with the ability to compound value over time.



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