ETFs

Dividend Growth Is Back. Join the Party with This Model Portfolio

Dividend growth is returning in a big way, and that scenario couldn't arrive at a better time with Treasury yields still low.

Advisors can position for what’s expected to be a materially better environment for payout names with the Global Dividend Model Portfolio, which is part of WisdomTree’s Modern Alpha series of model portfolios.

“This model portfolio seeks to provide capital appreciation and high current dividend income, through a globally diversified set of WisdomTree’s dividend income oriented equity ETFs. The model strives to deliver dividend income in excess of the global benchmark of equities,” according to WisdomTree.

The portfolio is buoyed by not only low interest rates, but what's becoming a rising tide of payout improvement.

“Net indicated dividend rate change increased $18.0 billion, compared to $9.5 billion in Q4 2020, -$2.3 billion in Q3 2020, -$42.5 billion in Q2 2020, and -$5.5 billion in Q1 2020,” according to S&P Dow Jones Indices.

Dividend Growth Across the Board

Investors should consider quality dividend growth stocks that typically exhibit stable earnings, solid fundamentals, strong histories of profit and growth, commitment to shareholders, and management team conviction in their businesses.

Dividends are in demand as fixed income investors face a lower-for-longer interest rate environment. The Federal Reserve is expected to maintain its near-zero interest rate policy to help push inflation up, bolster the economy, and lower the unemployment rate. The Fed has already stated it is willing to let inflation run higher to offset years inflation fell below its 2% target. Historically, dividend growers are strong inflation fighters

“The median Q1 2021 dividend increase in the S&P 500 was 7.69%, up from 6.56% in Q4 2020, 4.17% in Q3 2020's, 4.84% in Q2 2020, and 7.50% in Q1 2020,” continues S&P Dow Jones.

Adding to the case for the WisdomTree model portfolio is that some of last year's dividend offenders are rejoining the party.

"Companies that suspended their dividends have started to pay again, while others who decreased their dividends or left them unchanged in 2020 have resumed increasing payments," said Howard Silverblatt, Senior Index Analyst at S&P Dow Jones Indices. "The dollar amount of dividend increases in U.S. common stocks in Q1 2021 was the largest since Q1 of 2012 as reductions significantly declined in the quarter."

For more on how to implement model portfolios, visit our Model Portfolio Channel.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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