This year has been unusual for the markets in general and income specifically. On the one hand, S&P 500 companies have paid out a record $500 billion in dividends, according to research from CFRA. On the other, yields have been surprisingly low for a variety of reasons.
With roughly two thirds of the companies listed in the S&P 1500 index providing investors with dividends, many have turned to ETFs and mutual funds to meet the unique financial moment. Much of this has to do with the ETF wrapper’s ability to provide investors with easy exposure to diverse investments. “ETFs have become the investment vehicle of choice for a larger number of investors. They faced their toughest test ever in early 2020 and passed with flying colors,” said Ben Johnson, director of global ETF research at Morningstar, in an interview with Reuters earlier this year.
Diversity is especially important in these times when even surging markets that had an unprecedented eight-day run of shattering records can still feel volatile going into 2022. 90% of S&P 500 companies have so far reported earnings, with 81% beating profit estimates, often soundly. Estimates have been walloped by a median of 9% with almost three quarters of all companies surpassing their revenue goal posts by 5%. Lurking underneath all of this good news is an overwhelming sense of uncertainty. Bonds have had a wild ride of late, to say the least, and political uncertainty around the upcoming debt ceiling debate could knock everything down quite quickly.
Where to Find Steady Income
Another big question looming over the markets is inflation. With inflation looking more and more pernicious by the day, income-starved investors might want to consider investing in a fund like the SmartETFs Dividend Builder ETF (DIVS). DIVS is an actively managed dividend growth fund that focuses on quality companies with healthy cash flows and sound fundamentals.
DIVS has a track record of delivering moderate levels of income and outpacing inflation. It is an actively managed fund, which is advantageous in times of high volatility, that tends to look for valuation when targeting companies. A former mutual fund that converted into an ETF, DIVS holds a concentrated portfolio of about 35 companies, all of them approximately equally weighted.
The expense ratio is 0.65.
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