It’s not just broad market equity benchmarks that are approaching records. Stock dividends are doing the same, confirming that S&P 500 payouts rapidly bounced back from the pain incurred last year during the early stages of the coronavirus pandemic.
Add in elevated share buyback programs, and it’s fair to say that these are again go-go days for shareholder rewards. With experts bullish on dividend growth in 2022, investors looking to eschew stock picking while accessing a basket of high-quality payout growers may want to consider exchange traded funds such as the SmartETFs Dividend Builder ETF (DIVS).
Actively managed, DIVS is an example of a dividend ETF that’s made for the current environment and beyond. DIVS emphasizes quality, meaning that if markets suddenly swoon or companies look to rein in spending, the fund could prove more durable than high-dividend strategies and be less vulnerable to payout reductions.
“The resurgence of buybacks and dividends really tells us that companies are feeling a lot more secure about where the economy is heading,” said Ken Johnson, investment strategy analyst at the Wells Fargo Investment Institute, in a recent interview with Barron’s. “With that confidence comes their ability and willingness to issue those distributions.”
DIVS provides exposure to 10 industry groups, and the fund is heavy on consumer staples, industrial, and healthcare stocks — all sectors with quality traits and enviable histories of steady dividend growth. Those characteristics emphasize the utility of DIVS over the near- and long-term.
“In a note last month, Johnson and a colleague stressed that investors ‘should focus on the highest-quality U.S. large companies with strong balance sheets and cash flows’ that are capable of strong repurchase programs and consistent dividend increases,” reports Lawrence Strauss for Barron’s.
Underscoring the potential potency of DIVS is the fact that S&P 500 payouts hit a record in the third quarter, and given the current pace of the current quarter, the feat could be repeated again.
Another benefit of DIVS is that it’s a global ETF, meaning that there’s geographic diversity that levers investors to dividend growth outside the U.S. Indeed, payouts are rebounding in ex-U.S. nations and doing so in noteworthy fashion.
For example, U.K. dividends are bouncing back from some rough times seen in 2020 due to the pandemic, while payouts in France are growing at a notable pace. Likewise, payout growth in Switzerland remains as solid as ever. Those three countries combine for 31% of the DIVS roster.
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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.