Dividend growth strategies have been gaining in popularity over the past few months from advisors looking to insulate themselves from rising rates. Data from Refinitiv Lipper show that dividend funds have brought in a record $7.5 billion in flows in January.
But the challenge with passively managed ETFs that provide exposure to higher quality companies growing their dividends is that they’re tied to a specific index or methodology. If a company omits or suspends its dividend in response to market volatility, it can be removed from a specific benchmark and therefore cut from the holdings within a passive ETF.
This is where active management can come into play. An active manager can view that cut or suspension with a broader lens, understanding that this dividend suspension is most likely a one-off move and that the company is still a strong buy.
The T. Rowe Price Dividend Growth ETF (TDVG) can own traditional dividend-growing stocks when index-based funds can’t or won’t because of their methodology. TDVG is an actively managed fund that seeks dividend income and long-term capital growth.
According to T. Rowe Price, the fund “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.”
The fund has been bringing in capital in recent months. For the six months that ended February 11, TDVG has brought in $30.43 million in inflows. For the year that ended February 11, it’s brought in nearly $69.1 million.
TDVG has an expense ratio of 0.5%.
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