It’s been said that past performance is not a guarantee of future results. But many dividend strategies screen strictly for historical dividend growth without any forward-looking indication of a company’s ability to sustain – much less grow – its dividends. A more sensible approach includes both historical and forward-looking factors to screen for high-quality dividend-growers.
In the upcoming webcast, ETF Strategies for Rising Dividends from High Quality Companies, Dan Waldron, Senior Vice President, ETF Strategist, First Trust, will explain what dividend growth has to say about a company’s financial strength and discipline and look to the sectors that are positioned for above-average growth.
Specifically, investors looking to diversify their dividend portfolios can consider the First Trust Rising Dividend Achievers ETF (NasdaqGS: RDVY).
The First Trust Rising Dividend Achievers ETF tracks the NASDAQ US Rising Dividend Achievers Index, which holds 50 U.S. large caps that have been screened for their quality and dividend growth while eliminating REITs from consideration.
Rather than emphasizing pure yield or a company’s history of raising payouts, the ETF focuses on metrics like earnings, debt-to-equity, and payout ratios to assess not only a company’s ability to sustain its current dividend, but grow it over time. That positions the First Trust fund to capitalize on what is an increasingly positive payout environment.
To be eligible for inclusion in the index, companies must have paid a dividend in the trailing twelve-month period greater than the dividend paid in the trailing twelve-month period three and five years prior, show a positive earnings per share in the most recent fiscal year greater than the earnings per share three fiscal years prior, have a cash-to-debt ratio greater than 50%, and come with a trailing twelve-month period payout ratio no greater than 65%.
Financial advisors who are interested in learning more about dividend investments can register for the Tuesday, August 3 webcast here.