Dividend growth ETFs have a role to play in markets right now. With their ability to guide investors towards intriguing stock prospects, they stand out among other factor strategies. That could be a powerful tool amid looming uncertainty. Still, how can investors get the best out of them? Active investing could help unlock the dividend-focused funds, with the T. Rowe Price Dividend Growth ETF (TDVG) a solid example.
Dividend growth strategies look across a certain universe of firms and consider the health of their dividends. By assessing the past growth and future potential of a firm’s dividends, the ETF and its managers look to understand its overall outlook. With rising rate and recession uncertainty still lingering in a top-heavy market, that could be a potent screen for bigger firms.
While some strategies look to apply that screen via an infrequently-updated index, active management can take a closer look. Active managers bring their years of bottom-up, fundamentals-focused expertise to a more responsive, proactive approach to investing. By combining experience with an active remit, active dividend growth ETFs can respond more quickly and often with greater insight.
See more: “Use Active ETFs to Avoid Concentration Risk”
Dividend-paying companies, of course, often appear to be less exciting in a frothy, tech-heavy market. Those dividends are not just a potent signal, however, but also a source of current income. Combining those two factors in an active dividend growth fund package can make for an appealing ETF for investors.
That’s where a strategy like TDVG comes in. TDVG recently hit its three-year ETF milestone, actively investing in firms with competitive current dividend yields and either a strong dividend track record or growth potential. It also considers more traditional fundamentals like cash flow and balance sheet metrics.
Taken together, that’s helped the ETF return nearly 6% YTD and 10% over three years for a 50 basis point (bps) fee. Sitting above $300 million in ETF AUM, TDVG stands out among other dividend growth ETFs thanks to its active approach. With valuations high across a top-heavy market, investors may want to consider an active dividend growth fund like TDVG.
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