Decreased revenues will undoubtedly affect company dividends moving forward, which should put increased importance on dividends in today’s market. As such, investors should emphasize the need for a dividend growth strategy that can work in a post-coronavirus environment.
“The pandemic-driven shutdown of much of the global economy—and the uncertain path to recovery—are weighing on nearly every aspect of the investment landscape,” a Proshares Dividend Viewpoint article noted. “Of particular concern to many investors is the question of what will happen with dividends. It’s a fair question when you consider that dividends have contributed approximately 32% of the S&P 500’s total return since 1960.”
“Paradoxically, if we are in for a period of muted equity returns—an environment where at least some companies’ dividends may be at risk—dividends may have increased importance,” the article added “During the return-challenged 1970s, dividends accounted for nearly three-quarters of S&P 500 returns. It wasn’t an entirely lost decade. Investors earned a cumulative total return of 77% from the S&P 500 in that decade. The catch, however, was that 60% of that 77% was from dividends.”
ETF Dividend Options in Today’s Market
The ProShares S&P 500 Aristocrats ETF (BATS: NOBL) tracks the S&P 500 Dividend Aristocrats Index and is ProShares’ flagship dividend growth ETF strategy. The fund targets the best of the best in dividend growth, selecting components that have increased their dividends for at least 25 consecutive years. As a result of this high-quality filter, investors are left with a portfolio of first-rate dividend payers compared to say high-yield focused funds that feature companies in precarious financial positions as a result of over-leveraging.
Additionally, ProShares also offers dividend growth ETFs that focus on other market segments, like the ProShares Russell 2000 Dividend Growers ETF (BATS: SMDV) and the ProShares S&P MidCap 400 Dividend Aristocrats ETF (BATS: REGL) for those seeking quality dividend growers in the small- and mid-cap categories. REGL tracks a Dividend Aristocrats Index, which only requires 15 consecutive years of increased dividends for inclusion.
On the other hand, SMDV, which tracks the Russell 2000, the benchmark U.S. small-cap index, uses the Russell 2000 Dividend Growth Index. This index includes small-cap firms with dividend increase streaks of at least a decade.
Furthermore, investors can look towards diversification into international markets while tracking similar dividend growth strategies. For instance, the ProShares MSCI EAFE Dividend Growers ETF (BATS: EFAD) tracks developed market Europe, Australasia, and Far East companies that exhibit a minimum dividend increase streak of 10 years.
For more market trends, visit ETF Trends.