DGRW could be ideally positioned to endure higher interest rates, should the Federal Reserve opt to resume that trend later this year. While a rise in rates would diminish the attractiveness of dividend stocks with premium valuations and low growth, more high quality dividend payers or the group of dividend growers may stand out.
The $1.63 billion DGRW, which is over four years old, allocates substantial portions of its weight to cyclical sectors that often perform well when rates rise. For example, ETF allocates over 56% of its combined weight to technology, industrial and consumer discretionary stocks.
“DGRW also use earnings growth expectations as a way to predict future dividend growth. This is a forward-looking approach which is quite different from many other dividend-based ETFs that look backward for long dividend increase streaks (e.g., Dividend Aristocrats). By relaxing the requirement of having to pay increasing dividends for many years, the fund is allowed to own some excellent growth companies that have not been around long enough to pay out 20 or 25 years’ worth of increasing dividends,” according to Seeking Alpha.
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Tom Lydon’s clients own shares of DGRW.