The Dividend Growth ETF Outperforming SCHD

Dividends had a great year last year but have fallen off in 2023 – right? While some bigger index-based dividend strategies like Schwab US Dividend Equity ETF (SCHD) have struggled significantly, others have performed very well. Dividends can still play an important role in a portfolio this year, with TDVG a dividend growth ETF to consider.

Investors and advisors are likely very familiar with the benefits of dividends, adding current income to portfolios. That income can help boost a portfolio in uncertain, volatile times, yes, but it can also be reinvested. However, a dividend growth ETF adds an element that can help it outperform in a more growth-minded environment.

The T. Rowe Price Dividend Growth ETF (TDVG) has taken that approach and yielded some very positive returns in doing so. TDVG actively invests in global, large, and mid-cap firms with above-average growth measured by dividends and earnings. TDVG’s managers actively consider a firm’s balance sheet, cash flow, and whether it has a sustainable competitive advantage.

Taken together, that’s helped TDVG return 8.1% YTD. That not only outperforms SCHD’s negative YTD return but also outperforms TDVG’s Factset Segment average. TDVG has also doubled up on SCHD’s one-year performance, with TDVG returning 7.3% over one year.

See more: “Investors to Up Active ETF Allocations in ’24, ’25

Moreover, it’s important to consider the power of active investment. Active investing makes a portfolio more responsive to events. The dividend growth ETF’s active approach allows it to respond not only daily or weekly but even to intra-day changes. The strategy’s dividend approach has kept it right in line with the FactSet Segment average, meanwhile, at a 1.25% annual dividend yield.

While the U.S. economy looks increasingly set to pull off a “soft landing,” dividends may have lost some luster. However, dividends have positive, growth-oriented attributes, as seen in the T. Rowe Price Dividend Growth ETF approach. Charging 50 basis points and set to hit its three-year milestone next month, TDVG may be one to watch in the weeks ahead.

For more news, information, and analysis, visit the Active ETF Channel.