Many investors bet on dividend stocks during periods of inflation and market volatility.
Historically, investors who turn to dividend ETFs are generally those looking for low-risk investments and retirees who want a regular income, but the current environment has increased dividend ETFs’ appeal across all demographics.
Breaking a few short weeks of relative calm, a combination of tightening monetary policy, inflationary pressures, recessionary fears, and geopolitical uncertainty emanating from the Russia-Ukraine conflict brought a new bout of volatility to U.S. equities in mid-May, with the S&P 500 on May 17 notching its largest single-day decline since June 2020, according to S&P Dow Jones Indices.
Investors looking for less volatility may consider a fund like the SmartETFs Asia Pacific Dividend Builder ETF (ADIV), which offers global exposure to high-quality dividends. The fund invests in equities of companies domiciled in China, Taiwan, Hong Kong, Australia, Singapore, the U.S., South Korea, Thailand, Malaysia, and India, according to VettaFi.
ADIV has earned the Morningstar Quantitative Rating of Gold due to its strengths, including its sizable cost advantage over competitors, the management team’s considerable industry experience, and high-quality exposure.
This strategy tends to hold smaller, more value-oriented companies compared with its average peers in the Pacific/Asia ex-Japan Stock Morningstar Category, according to Morningstar.
The strategy also has a position favoring high-quality stocks, which could contribute to higher downside risk protection. High exposure to the quality factor means holding companies that are consistently profitable, growing, and have solid balance sheets, according to Morningstar.
Additionally, the portfolio managers have shown an underweight risk tilt, demonstrated by low volatility exposure. These low-risk stocks are typically at their best when markets are not — making now a great time to add ADIV exposure to a portfolio.
For more news, information, and strategy, visit the Dividend Channel.