The T. Rowe Price Dividend Growth ETF (TDVG) is an example of an actively managed exchange traded fund that’s ready for its close-up due to a favorable fundamental backdrop and compelling tailwinds.
TDVG is at the center of two viable trends: dividend growth and the possibility that value stocks could regain the shine they had earlier this year.
TDVG “invests at least 65% of its total assets in dividend-paying stocks, with an emphasis on stocks that are expected to increase their dividends over time. When appropriate, the portfolio manager may attempt to buy stocks when they are temporarily out of favor or undervalued by the market,” according to T. Rowe Price.
Dividends are growing, and with a little more growth this quarter, payouts could return to highs last seen prior to the coronavirus pandemic.
“The global total of $471.7bn was boosted by delayed 2020 dividend payments returning to their normal timetable, but also by higher special dividends and positive exchange-rate effects. Underlying growth was 11.2%,” according to Janus Henderson.
TDVG is a semi-transparent ETF, meaning its holdings aren’t disclosed on a daily basis, but its sector weights as of the end of July prove that T. Rowe Price is levered to quality and prime payout growth destinations.
“Cash flow, which is necessary for the payment of dividends, fell less in aggregate than profits,” continued Janus Henderson. “Companies were also helped by accessible credit markets and various government support schemes. Indeed, the latest edition of the Janus Henderson Corporate Debt Index in early July highlighted that companies have used their financial flexibility to bolster their balance sheets with new borrowing, new equity or new hybrid capital issuance i.e. convertibles. This has given them substantial financial firepower as the world recovers.”
TDVG allocates nearly 39% of its roster to technology and healthcare stocks. That’s constructive for long-term dividend growth because those are two of the most cash-rich sectors.
TDVG’s above-benchmark weight of 13.51% to financial services is another viable source of payout growth this year because major domestic banks have strong balance sheets, the economy is sound, and the Federal Reserve approved payout increases for banks. The companies are responding by unleashing massive buyback programs and boosting dividends.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.