VDSA allocates nearly 45% of its combined weight to the consumer staples and industrial sectors, which are dependable dividend growth groups. The ETF also devotes over a quarter of its combined weight to consumer discretionary and technology stock. Those sectors have, over the past several years, become significant contributors to S&P 500 dividend growth.
VSDA features no exposure to the high-yielding real estate and utilities sectors. Nor does the ETF feature any exposure to energy stocks. The energy sector, the worst-performing group in the U.S. this year, has seen more negative dividend action in recent years than any other sector.
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.
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