Dividend stocks and ETFs faced plenty of challenges in 2018 as the Federal Reserve boosted interest rates four times, but S&P 500 dividend growth was still impressive.
The “average Q4 2018 dividend increase in the S&P 500 was 10.24 percent, down from 10.41 percent during Q4 2017; 2018 average is 13.48 percent, up from 2017’s 11.36 percent,” according to S&P Dow Jones Indices.
Last year, high dividend strategies, including the Vanguard High Dividend Yield ETF (NYSEArca: VYM), struggled against amid the Fed’s tightening regime, but VYM remains a compelling option for dividend investors.
Investors may also consider consistent dividend growers as a way to gain exposure to this group of quality companies as dividend growers and high quality stocks share a number of similar characteristics. While VYM is advertised as a high-yield dividend ETF, the truth is the fund takes steps to mitigate some of the risks associated with high-yield stocks.
VYM, one of the largest U.S. dividend ETFs, “tracks more than 400 of the highest-yielding stocks on the market, showering its investors with nearly 60% more in dividends than they would earn by investing in S&P 500 index funds,” according to Motley Fool.
Dividend Growth Opportunities
While VYM is framed as a high-yield dividend fund, it offers investors exposure to a wide array of stocks with histories of steadily increasing payouts, which is something to consider amid solid dividend growth expectations for 2019.