Following a spate of dividend cutting by S&P 500 firms in the first half of 2020, advisors and investors may want to explore the benefits of active management combined with an emphasis on dividend growth. The T. Rowe Price Dividend Growth ETF (TDVG) checks those boxes.
TGRW is a new addition to the active non-transparent exchange traded funds (ANTs) fray. ANTs are new funds that combine the best of the passive ETF and actively managed mutual fund universes.
One way of looking at ANTs is that this category is new fund “technology.” ANTs represent the best of both worlds ideas: the advantages of active management with the liquidity and tradability of ETFs, something that long eluded the actively managed mutual fund industry.
Constructed similarly to flagship investment strategies that have served T. Rowe Price clients well for decades, the active ETFs use the same portfolio managers as their corresponding mutual funds and employ the firm’s long-standing strategic investing approach, characterized by rigorous research, risk awareness, and independent decision making.
Why Now for TGRW
TDVG’s emphasis on dividend growers is particularly relevant in today’s market environment. Dividend-growing companies are also high quality names. Steady dividend payouts have also helped produce improved risked-adjusted returns over time.
The high-quality focus may also help dividend growers outperform or do less poorly than the broader markets during weaker periods.
Dividends have added significantly to returns over time, contributing approximately 32% of the S&P 500’s total return since 1960. During the return-challenged 1970s, dividends made up nearly three-quarters of S&P 500 returns – while investors earned a cumulative total return of 77% from the S&P 500 in that decade, 60% of that 77% was from dividends.
TDVG seeks dividend income and long-term capital growth by investing the majority of its assets in the common stocks of dividend-paying companies expected to increase their dividends over time.
Investors should consider quality dividend growth stocks that typically exhibit stable earnings, solid fundamentals, strong histories of profit and growth, commitment to shareholders, and management team convection in their businesses.
TDVG charges 0.50% per year, or $50 on a $10,000 investment.
For more on active strategies, visit our Active ETFs Channel.
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.