Investors Pile Into Dividends Amid Rising Rates and Inflation | ETF Trends

With both bonds and equities heading south amid rising inflation in the first half of 2022, one place investors are flocking to is dividend-paying companies.

“Dividend-paying companies are typically going to have higher levels of free cash flow,” said Dave Sekera, chief U.S. market strategist at Morningstar, in a CNBC report. And they may be valued more modestly, he said.

“Both of those have definitely been attractive for investors this year as we see the economy softening, interest rates rising and inflation still running hot,” Sekera said.

For fixed income investors looking to dividend income for their portfolios, one fund worthy of consideration is the Vanguard Dividend Appreciation Index Fund ETF Shares (VIG), which seeks to track the performance of a benchmark index that measures the investment return of common stocks of companies that have a record of increasing dividends over time: the Nasdaq US Dividend Achievers Select Index.

The advisor attempts to replicate the target index by investing all, or substantially all, of its assets in the stocks that make up the index, holding each stock in approximately the same proportion as its weighting in the index.

Overall, VIG:

  • Seeks to track the performance of the NASDAQ US Dividend Achievers Select Index (formerly known as the Dividend Achievers Select Index).
  • Provides a convenient way to track the performance of stocks of companies with a record of growing their dividends year-over-year.
  • Follows a passively managed, full-replication approach.

An International Approach

For investors seeking additional yield, one option is to screen for opportunities that may arise overseas, giving additional diversification. This is where an ETF like the Vanguard International High Dividend Yield ETF (VYMI) can benefit a fixed income investor’s portfolio.

VYMI offers an all-in-one option, allowing investors to navigate the international debt markets without needing to pore over copious amounts of financial data to find the best opportunities. Furthermore, international investing has its own set of nuances, and VYMI can assist with taking out that guesswork.

Overall, VYMI:

  • Seeks to track the performance of the FTSE All-World ex US High Dividend Yield Index.
  • Provides a convenient way to get exposure to international stocks that are forecasted to have above-average dividend yields.
  • Employs a passively managed sampling strategy.

For more news, information, and strategy, visit the Fixed Income Channel.