Dividend ETFs are highly attractive in the current environment, offering investors generous yields and resiliency amid inflation and periods of rising rates.
Dividend increases continue to accelerate, as net gains for the first quarter would have set a new record if not for AT&T’s $6.9 billion reduction as part of its WarnerMedia spinoff, according to Howard Silverblatt, senior index analyst, S&P Dow Jones Indices.
“With Q4 2021 earnings and sales setting record highs and cash flows strong, I expect this trend to continue even as interest rates rise,” Silverblatt wrote in a statement. “Both dividends and buybacks are expected to post a record 2022 payment.”
According to Silverblatt, 963 dividend increases were reported during Q1 2022, a 6.3% year-over-year increase over the 906 reported during Q1 2021, and total dividend increases were $27.7 billion for the period, up from $20.3 billion for Q1 2021.
There are many dividend ETFs currently available to investors, with each one offering different exposure, income generation, and total return. Finding standouts in the group is difficult, but by focusing on some key metrics, investors can unearth compelling products, including the SmartETFs Dividend Builder ETF (DIVS).
DIVS has 35 holdings in its portfolio, 31 of which grew their dividends in 2021. Three companies kept their dividends flat, and just one company cut its dividend. This follows the momentum from 2020, which saw 28 companies grow their dividends, six keep their dividends flat, and one company cut its dividend, according to the firm.
The average dividend growth across all 35 companies included in the fund was 6.3%, and the firm generally saw dividend payments surprise to the upside.
The companies paying dividends are often mature firms — though some can be quite small — that have mastered their businesses, made the essential investments, and now generate more money than they have a meaningful use for, generally making them more predictable and stable investments than others.
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