Investors are readying themselves for some big changes in the investing world this Fall. Both U.S. elections and rate cuts loom for the final stretch of 2024. The U.S. stock market could hold significant opportunities, in turn, for those who’ve prepared for those events. While most investors are likely well positioned in their core holdings, layering in other exposures could offer that extra “oomph” to end the year on a positive note. Dividends, for example, could provide an intriguing lens through which investors can consider their growth investing allocations.
See more: September Effect Sees Stocks Dip Yearly; Can Active Investing Help?
Dividends do much more than simply offer a bit more current income – although that should not be underrated as a benefit. What dividends do as well is provide information about firms’ own outlook for the future. A firm offering healthy dividends may be feeling confident about its prospects. By contrast, a lack of dividends or mediocre numbers could suggest a poor internal outlook.
With so many ways to measure dividends’ impact, then, it might be worth considering the ETFs that lean on that information. The T. Rowe Price Dividend Growth ETF (TDVG) does that and more. The active dividend growth ETF actively invests in stocks with good financials and growth potential measured using dividend yield and dividend track records. The strategy looks for either a record of or potential for above-average dividend growth potential.
Competitive at only 50 basis points (bps) for a fully active approach, the fund also considers a firm’s balance sheet and cash flow and whether it has a sustainable competitive advantage. Together, that has helped the strategy return 17% over one year, per T. Rowe Price data. The fund has averaged close to 13% annually since inception. Looking ahead, the firms it targets could benefit from rate cuts. At the same time, the fund’s flexibility could help it adapt to election-related volatility.
Taken together, TDVG’s focus on dividends could bear fruit. It has gathered nearly $700 million in AUM since launching back in 2020, potentially appealing to curious investors.
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