Investors looking to apply a high level of scrutiny to their dividends — something all investors should do — can have a friend in the SmartETFs Dividend Builder ETF (DIVS).
That actively managed exchange traded fund is exceedingly relevant at a time of renewed global dividend growth, and its managers do the heavy lifting for investors by applying that aforementioned scrutiny. By emphasizing quality traits, DIVS steers investors clear of potential offenders — a valuable advantage in any environment, let alone one in which markets aren’t far removed from the dividend chaos caused by the start of the coronavirus pandemic in 2020.
DIVS also matters because it’s ideal for capturing the long-term strength of reliable dividend growth, a style that Goldman Sachs recently put under the microscope.
“Goldman has a basket that consists of 50 stocks with an above-average dividend yield and the fastest expected dividend growth,” reports Yun Li for CNBC. “These stocks will raise their dividends by an annualized rate of 11% through 2023, compared to the S&P 500′s median dividend growth rate of 6%, Goldman analysts estimate. The basket pays a dividend of 3.1%, more than double the S&P 500′s 1.5%. The portfolio’s total return this year is 23%, which is the same as the S&P 500′s gains for 2021.”
Some DIVS components made the cut on the Goldman list. Pepsi (NASDAQ:PEP), which accounts for nearly 3% of the DIVS roster, is one example. Goldman estimates that the soft drink and snacks giant will yield almost 3% at the end of this year and that its dividends’ compound annual growth rate (CAGR) will be 13% from 2021 through 2023.
Another DIVS component highlighted by Goldman is semiconductor maker Texas Instruments (NASDAQ:TXN). That stock accounts for 2.79% of the ETF’s roster. Goldman forecasts that Texas Instruments will yield around 2.5% when 2021 ends and that its dividends’ CAGR for 2021 through 2023 will be 12%.
Average those dividend CAGRs for the pair of DIVS components, and that’s 12.5%, easily enough to beat inflation, which is a reminder to investors concerned about inflation’s negative effects on purchasing power and bond portfolios. Dividend growth historically beats the Consumer Price Index (CPI), and that’s an indication that DIVS could be a solid near-term idea for long-term investors.
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.