It’s been a strong first half for the S&P 500 as the large-cap index was up 16% year to date as of June 18. This year, the growth style ETFs tied to this benchmark have outperformed most others including dividends and value ones. However, there are dividend-paying stocks among this year’s stronger performers.
The SPDR Portfolio 500 Growth ETF (SPYG) has risen 25% so far, led by Nvidia and other information technology and communications services stocks. This strong performance was easily ahead of the 6% gain for the SPDR Portfolio 500 Value ETF (SPYV). SPYV has far more exposure to energy and financial services stocks, and far less to communications services and tech stocks than SPYG.
Dividend ETFs Lagging Behind
While SPYV has been relatively weak, dividend-related S&P index-based ETFs struggled even more. For example, the SPDR Portfolio S&P 500 High Dividend ETF (SPYD) was up just over 4%. S&P-index-based SPYD owns the 80 constituents with the highest dividend yields. Companies like International Paper, Iron Mountain, and Public Service Enterprises are among its top holdings.
Meanwhile, the ProShares S&P 500 Dividend Aristocrats ETF (NOBL) was up just under 3% for the year. NOBL requires large-cap, S&P 500 companies to have paid and raised its dividend for 25 consecutive years. Colgate-Palmolive, Ecolab, and Walmart are examples of those in this elite club.
The SPDR S&P Dividend ETF (SDY) offers a twist on NOBL. SDY’s dividend growth mandate is “only” 20 years, and it is applied to companies in the multicap S&P 1500 index. Holdings of the index fund include T Rowe Price and WEC Energy Group. SDY rose approximately 4% year to date as of June 18.
Another dividend growth ETF, the Vanguard Dividend Appreciation ETF (VIG), rose just over 9% for the year. At 10 years, VIG has the shortest dividend growth track record requirement of the funds mentioned so far. This has enabled S&P-index-based VIG to own more information technology stocks like Apple, Broadcom, and Microsoft — not just Procter & Gamble.
Some Recent Dividend Initiators Shining
However, some of the strongest-performing dividend-paying stocks in 2024 are not yet inside VIG or most of its peers. This is due to their short record of returning cash to shareholders:
- Micron Technology: up 86% in price; initiated its dividend in the second half 2021
- Constellation Energy Group: up 91%; first paid a dividend in 2022
- Meta Platforms: up 44%; paid its first dividend in February 2024
- Alphabet: up 27%; instituted a dividend in June 2024
An Index of Up-and-Coming Dividend Payers
Shares of these companies will not be in the S&P dividend growth indices for years, but they are members of a new VettaFi index. The VettaFi Dividend Initiators Index consists of large-cap companies that started paying a dividend after not paying for at least three years. A company stays part of the index for three years as long as the company makes regular payments.
The VettaFi index was up 17% in 2024, modestly ahead of the S&P 500, and has a strong back test of more than 20 years. There is currently no ETF tracking this VettaFi index. However, as more growth companies join the ranks of Alphabet and Meta Platforms in paying dividends, ETF investors will start to notice what they are missing.
For more news, information, and analysis, visit VettaFi | ETF Trends.