As Dividend Records Are Toppled, Drill Down on DIVS | ETF Trends

Positive dividend data continue piling up and that’s good news for an assortment of exchange traded funds, including the SmartETFs Dividend Builder ETF (DIVS).

Against the backdrop of rising global payouts, DIVS merits the attention of equity income investors for multiple reasons, including its status as an actively managed ETF and the point that it holds both domestic and international developed market stocks.

“US dividends increased 8.3% on an underlying basis in the second quarter to $144.4 billion, an all-time quarterly high, according to the latest Janus Henderson Global Dividend Index. Two-fifths of the increase can be traced to the financial sector. Notably, Morgan Stanley and Wells Fargo made the largest contributions to growth in US dividends, collectively contributing an extra $1.1 billion,” according to the latest reading of the Janus Henderson Global Dividend Index.

While those two banks aren’t members of the DIVS lineup, the ETF allocates 5% of its weight to the financial services sector and, as noted above, it’s actively managed meaning it more nimbly adjusts holdings and sector-level exposures than index-based rivals.

Additionally, data confirms DIVS not being a dedicated U.S. equity fund is advantageous for investors because the U.S. isn’t monopolizing payout growth this year.

“Globally, dividends surged 19.1% on an underlying basis to an all-time quarterly high of $544.8 billion in Q2 2022, as 94% of companies raised or maintained dividend payments during the quarter. Despite the significant economic disruption caused by the pandemic, global dividends have surpassed pre-pandemic levels,” noted Janus Henderson.

Sector attribution in DIVS is important for another reason. Some sectors are littered with high-yield stocks, some of which can be dividend offenders. Take the case of AT&T (NYSE: T) and its recent dividend cut, which weighed on payouts in the communication services sector. Fortunately, DIVS doesn’t hold shares of AT&T nor is its communication services weight cause for concern.

Another point in favor of DIVS is the reputation of dividend stocks as above-average buffers against a recession, which is something to consider with the U.S. economy teetering on the brink of a recession.

“As we move toward 2023, any slowdown in economic growth will likely have a larger impact on dividend payments outside the U.S. Within the U.S, dividend growth has shown remarkable resilience across market cycles, as companies have demonstrated they are more likely to cut back on share buybacks than trim dividend payment,” noted Matt Peron, Janus Henderson director of research.

For more news, information, and strategy, visit the Dividend 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.