With the rising tide of inflation and rate hikes, it’s almost imperative that investors look to other sources of income outside bonds. That’s where dividends come into play, but not just those from companies that pay high dividends.
On paper, those might seem like the best strategy in order to try and outpace inflation. With consumer prices rising fast, the Federal Reserve is looking to tighten its monetary policy and start raising rates.
That said, fixed income investors need to look beyond just simply sorting a column by highest yield to find the best income opportunities. A strong track record of dividends is also necessary, which allows investors to focus on consistent yield.
All of that can be available in the convenience of an ETF wrapper with the Invesco Dividend Achievers ETF (PFM). The fund seeks to replicate, before fees and expenses, the NASDAQ US Broad Dividend Achievers™ Index (Index), which is designed to identify a diversified group of dividend-paying companies.
Under the Hood of PFM
When popping the hood of PFM, there’s an obvious skew towards large-cap equities that have proven their worth in providing dividends over time. Dissecting it further with factors, the largest allocation (as of February 17) is towards large-cap value and large-cap blend; the combination makes up close to 70% of the fund’s assets.
Looking further at the fund’s holdings, investors will see familiar names from a variety of sectors. Once again, the ongoing theme is companies that have a long track record of dividends — 10 or more consecutive years.
No one sector dominates the fund. Investors will see a varied allocation that spans across information technology, consumer staples, healthcare, financials, industrials, and more.
Not only do investors get income, they also get a steady price appreciation over the years. PFM has returned a 36% gain within the last few years.
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