The most recent batch of global dividend data indicates that payouts accelerated in the third quarter, and market observers expect more of the same in the current quarter.
Translation: The current global dividend outlook is appealing, particularly against the backdrop of low interest rates throughout much of the developed world. That enhances the allure of exchange traded funds, such as the SmartETFs Dividend Builder ETF (DIVS).
Amid those low global interest rates and resurgent payout growth in the U.S., Europe, and beyond, the actively managed DIVS could be a potent solution for equity income investors in the fourth quarter and into 2022.
“Global corporate dividends are set to reach a record high this year, as a rebound in business activity and a rise in consumer demand boosted profits for most sectors which were hit by the pandemic last year,” reports Reuters. “According to a Reuters analysis of Refinitiv data for 3,394 global companies with market capitalization of at least $1 billion, their total payouts to shareholders are estimated to be $1.37 trillion in 2021.”
On the surface, higher dividends appear to be a rising tide that lifts all payout boats, but not all ETFs are as levered to theme of dividend growth as is DIVS. The fund eschews yield in favor of focusing on quality sources of payout growth that can be durable over long holding periods.
DIVS’ status as a global fund is also relevant to investors in the current environment.
“The data showed European companies’ payouts in 2021 are estimated at $252.4 billion, a 25% rise over last year. U.S. dividends are expected to grow to $562.3 billion, an 8.6% increase,” according to Reuters.
Rosy forecasts for U.S. and European dividends are integral to the DIVS thesis because the fund allocates 52% of its weight to domestic equities, while European stocks from six countries combine for 41% of the fund’s weight, according to issuer data. The U.K. and Switzerland combine for 24%.
“Mining firms led the dividend payouts, boosted by a surge in commodity prices this year, according to the data,” notes Reuters. “The financial sector is also expected to deliver higher dividends, as global central banks such as the Federal Reserve and the European Central Bank relaxed their restrictions on dividends and buybacks they imposed last year.”
While DIVS isn’t heavily allocated to mining stocks, it does devote 5% of its roster to financial services names.
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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.