While equities, in general, stumbled out of the gate in 2022, it’s been a banner first quarter for dividend-producing exchange-traded funds (ETFs). Dividend stocks of all kinds apply, as they were, for the most part, all stellar performers across the board.
“Thanks to a comparatively good quarter for defensive sectors and value stocks, dividend stocks made a resurgence in the 1st quarter,” The Street article said. “Of the three major dividend stock groups – high yield, dividend growth, and dividend quality – high yielders performed the best.”
“This group tends to be overweight consumer staples, energy and financials, three sectors that all outperformed the market in the 1st quarter,” the article added. “All three groups beat the S&P 500, so income seekers finally had a comparatively good quarter.”
An Eye On Dividend Growth
While it’s one thing to exhibit dividends, it’s another thing to grow and sustain them over time. This is where the T. Rowe Price Dividend Growth ETF (TDVG) shines.
By utilizing an active management style, TDVG managers seek 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 portfolio typically holds between 100 to 125 dividend‑paying stocks selected through analysis based on fundamentals such as the potential for generating excess cash flow, the potential trajectory of the company’s financial condition, and the quality of the management team. The portfolio maintains a relatively broad set of equities across industries to help manage position sizes and control the risk profile.
TDVG employs a conservative, “growth‑at‑a‑discount” approach that emphasizes dividend growth, especially when valuations appear temporarily depressed. Rather than chasing returns, this research-driven approach is designed to help limit the volatility typically experienced from shifts in momentum or changing investor sentiment.
Based on a long-standing mutual fund strategy with the same portfolio manager, TDVG has already been a steady and consistent performer — giving buy-and-hold investors plenty of reasons to look at the ETF more closely. Since the strategy’s inception as an ETF in August 2020, it’s delivered more than a 30% gain, including an excellent rebound from the market sell-off in early 2022.
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