Global easing has bolstered the appeal for dividend ETFs since the start of the year. The U.S. economy is presently sporting a low-rate environment. The ECB has launched a QE program with negative interest rates in January. Japan has long been pursuing the QE program with zero interest rates and several other developed nations along with emerging nations like India and Turkey are going for rate cuts since last month.
Global growth worries have taken the center stage with U.S. economic growth momentum slowing down in the final quarter of 2014. In such a scenario, it can be an excellent idea to focus on dividends. These cash payouts can safeguard one's portfolio in bear market movements and ensure steady income in a low yield backdrop (read: 3 Top Performing Dividend ETFs to Watch in 2015 ).
Among dividend-oriented ETFs, tapping of companies that have a strong history of growing dividends seems a better idea than those which hand out the largest payouts or offer largest yields. Historically, dividend growers tacked on better gains than the other dividend ETFs. Probably, thanks to this pattern and to meet the need of the hour, Exchange Listed Funds Trust recently filed two dividend growth ETFs, one targeted at domestic companies and other at international companies.
The Duo in Focus
The Defensive Dividend Growth ETF looks to track the large-cap, low volatility and dividend paying stocks based in the U.S. Per the prospectus , companies that have paid dividend in the last three years, those whose dividends have increased over the last three years and those with trailing 12-month dividend yields greater than 1% have the chance of being included in the index tracked by the fund.
After the selection, 100 large companies having the lowest volatility are selected. The second one revolves around the international arena including emerging market issuers but with the same concept and criteria. The ticker codes and expense ratios of the funds are not disclosed yet.
How Does it Fit in a Portfolio?
The ETFs will be intriguing options for investors looking for steady dividend income. International dividend investing especially in Europe can be a wise bet for yield-hungry investors at the current level as rates are prevailing at rock-bottom levels in the continent. Also, in the U.S., rates are rising slowly. Though the Fed is poised to hike key rates this year, global turmoil should keep long-term yields at check. In such a situation, the newly filed ETFs should reward investors with decent yields (read: Dividend ETFs Explained: What Investors Need to Know ).
Focus on dividend growth in the U.S. market is definitely not a novel idea as the space already has some ultra-popular ETFs like iShares Core Dividend Growth ETF ( DGRO ), SPDR S&P Dividend ETF ( SDY ), V anguard Dividend Appreciation ETF ( VIG ) and PowerShares Dividend Achievers ETF ( PFM ). Among these, VIG is the highest asset gatherer with about $13.8 billion in assets and 10 bps in fees followed by SDY with about $13.8 billion in assets and 0.35% expense ratio (read: Focus on Stocks with Strong Dividend Growth with These 5 ETFs ).
The international dividend ETF space is also packed with products though not all with the same objective. However, the newly filed international fund may have to compete with the likes of PowerShares International Dividend Achievers Portfolio ( PID ) and International Hedged Dividend Growth Fund ( IHDG ). However, to give its peers a run for money, Exchange Listed Funds Trust has to price its products competitively.
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