Address Volatility With an ETF That Eyes Long-Term Dividends

For fixed income investors, addressing future volatility with companies that emphasize long-term, sustained dividends is a must in the current times, and inherent in the iMGP Berkshire Dividend Growth Equity ETF (BDVG).

While equities markets have been rallying the past week after a Fed rate pause, macroeconomic headwinds like inflation and rising rates could add more volatility. Adding to the volatility mix are geopolitical factors from around the globe as well as a forthcoming 2024 presidential election.

“The ongoing market volatility continues to add to investors’ woes, making it difficult for them to pick the right stocks,” a CNBC report aptly said.

When the wall of worry gets taller, fixed income investors need to rely on sustainable income with a quality component. This means putting a heavy emphasis on companies that not only provide competitive dividends to compete with today’s yields, but also have the long-term prospect of future income growth.

As the aforementioned CNBC article said, “it is always better to have a longer-term investment horizon and look for names that can enhance total returns with safe dividends and capital appreciation.”

Per its baseline fund description, BDVG emphasizes stocks with a strong track record of paying dividends or expected to increase their dividends over time. The fund’s investment universe is predominantly U.S. large-cap stocks, which can withstand volatility in heavy market pressure.

A Rigorous Research Approach

Screening for companies with sustainable dividend models requires a healthy dose of research steeped in a copious amount of rigor. In essence, it requires a discerning approach that most investors more than likely don’t have the time for, which makes BDVG an easy ingress into a portfolio of quality companies that meet the fund’s dividend standards.

“We don’t simply rely on historical dividend screens,” said Gerard Mihalick, portfolio manager and partner at Berkshire Asset Management. “We have a very rigorous approach that evaluates a company’s value and potential for future dividend growth.”

Mihalick added: “We conduct our analysis as if we were going to acquire the entire company. This is what we believe gives us an edge over other strategies and believe it’s a commonsense approach to investing.”

Furthermore, the fund’s active management strategy can further address any forthcoming volatility by remaining pliable in any market environment. Whether rate hikes continue, pause, or turn into rate cuts, an active management strategy allows the portfolio managers to adjust the holdings according to the pulse of the market or if other dividend-sustaining opportunities exist.

BDVG’s emphasis on current and consistent dividends as well as growth can serve a portfolio in any market environment, whether trending higher or lower. BDVG is available with a 0.55% expense ratio.

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