Third-quarter dividend growth was solid for S&P 500 member firms and more than 80% of the benchmark U.S. equity gauge currently pay dividends.
Companies that have consistently increased dividends tend to be high in quality and show a strong potential for growth. These dividend growers have been able to withstand periods of market duress, exhibiting smaller drawdowns as investors sold off riskier assets, while still delivering strong returns on the upside, to generate improved risk-adjusted returns over the long haul.
The Fidelity Core Dividend ETF (NYSEArca: FDVV) delivers exposure to some dependable dividend growers. In fact, FDVV is dedicated to consistent dividend growth as highlighted by the methodology behind the Fidelity Core Dividend Index.
“The Fidelity Core Dividend Index is designed to reflect the performance of stocks of large and mid-capitalization dividend-paying companies that are expected to continue to pay and grow their dividends,” according to Fidelity.
Stocks with steady yields reassure investors of a company’s strong financial health. Additionally, dividend-paying stocks typically outperform those that do not pay over the long haul, with less volatility, due to the compounding effect of dividends on the investment’s overall return. Over the past 40 years, companies that boost payouts have proven to be less volatile than their counterparts that cut, suspended or did not initiate or raise dividends.