There’s a belief that well‑timed investments in companies that pay and increase their dividends over time have a higher probability of outperforming the broad U.S. market. Launched in August 2020, the T. Rowe Price Dividend Growth ETF (TDVG) is an ETF seeking dividend income and long-term capital growth.
This actively managed ETF seeks to provide clients with a growing stream of dividend income and superior risk‑adjusted returns. It’s a philosophy that has not changed since the inception of the mutual fund version, the T. Rowe Price Dividend Growth Fund, which launched in 1992.
Similar to the mutual fund version of the strategy, TDVG invests at least 65% of its total assets in dividend-paying stocks, emphasizing companies that are expected to increase their dividends over time. More specifically, the portfolio typically invests in between 100 and 125 dividend‑paying companies, including holdings such as Microsoft (MSFT), Apple (APPL), and Visa (V).
When selecting the portfolio’s holdings, the durability of the company’s business model is tested by assessing the management team quality, the potential for excess cash flow generation, and both the current state and potential trajectory of the company’s financial condition. T. Rowe Price is mindful of broad industry diversification and manages position sizes to control its risk profile. Additionally, their patient, long‑term approach seeks to minimize portfolio turnover.
Although not specifically a value-based mandate, when appropriate, the portfolio manager may choose to buy stocks when they seem temporarily out of favor or undervalued by the market. This growth-at-a-discount approach doesn’t rely on market momentum but instead allows the research and valuation process drive results.
TDVG is appropriate for investors who seek a stock portfolio with the potential for a mix of income and capital appreciation from a tenured strategy and experienced manager. Tom Huber, an experienced fund manager with a long history of managing dividend growth equities, is the ETF’s leader. Huber has been managing dividend growth portfolios since 2000 and previously served as an analyst for T. Rowe Price, specializing in leisure, food and drug retail, and specialty retail.
For more on active strategies, visit our Active ETF Channel.