Dividend stocks and exchange traded funds are delivering for investors this year, and while high-dividend strategies are commanding much of the positive attention, payout growth is always meaningful over the long term.
That’s confirmation that the SmartETFs Dividend Builder ETF (DIVS) is among the dividend ETFs with the goods to capitalize on payout growth — a relevant trait at a time when inflation is still high.
In fact with forecasts calling for stout global payout growth this year, the case for DIVS grows stronger because the ETF features domestic and foreign stocks.
“With dividend payments surging in the first half of the year, fueling our Dividend Forecasting team’s expectation for 6.5% growth in global aggregate dividends in 2022, retail and institutional investors have gravitated to high dividend paying stocks,” according to IHS Markit.
The research firm notes that dividend payers are outperforming non-dividend payers across multiple regions in 2022, including Europe and Asia-Pacific. DIVS has ample exposure to European dividend names, while the SmartETFs Asia Pacific Dividend Builder ETF (ADIV) provides exposure to ex-Japan Asian payout equities.
“Dividend strength by industry is largely expected to fall in-line with broader macroeconomic trends,” added HIS Markit. “Other rotational trends will also be present in dividend payments as consumer demand shifts from products to travel, with the travel and leisure sector expected to grow substantially. Meanwhile, personal care and healthcare are each expected to flatten, slowing from a banner 2021 that saw those industries benefit from pandemic spending.”
Markit’s outlook for bank dividends is similarly bullish, and that’s important to investors considering DIVS because the actively managed ETF allocates 16% of its combined weight to pharmaceuticals and bank stocks.
There are other points that speak to the benefits of DIVS being a dividend growth strategy. Namely, payouts are projected to grow, and professional investors are leveraging that data to buy stocks that could be dividend boosters. That could include some DIVS components.
“The results demonstrate an upward trend in institutions’ favor towards shares with the highest projected dividend yield since mid-2020 across each region. The highest correlations are observed in the Developed Pacific universe, while Developed Europe experienced the largest increase,” noted IHS Markit.
At the geographic level, forecasting data are relevant because estimates for payout growth in the U.S. and Europe — the two most prominent geographic exposures in DIVS — are compelling. Then there’s inflation protection, which DIVS offers.
“Inflation and global recession fears are behind the trend. With the US and Eurozone inflation forecast between 7.5 to 8% for 2022, dividend stocks provide much needed yield to protect against asset erosion,” concluded IHS Markit.
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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.