Ohe pick-up in dividend growth was one of the brightest trends to play out in financial markets last year, and it didn’t come too soon as U.S. interest rates hovered around historic lows.
Payments growth has been strong throughout the year, but the fourth quarter paints an accurate picture of what equity investors have been treated to in 2021.
Regarding the S&P 500, “US ordinary dividend increases in Q4 2021 were $20.6 billion, down 7.5% from $22.2 billion in Q3 2021 and up up 48.5% from $13.9 billion in Q4 2020,” says S&P Dow Jones Indices. “The net change in the indicated dividend rate increased by $18.0 billion, compared to $20.9 billion in the third quarter of 2021 and $9.5 billion in the fourth quarter of 2020.”
It’s impressive, but there are probably more this year. At the start of this year, corporate America hoarded $7 trillion in cash, much of which will be used for buyouts and dividends. On that note, Bank of America’s Savita Sabramanian predicts S&P 500 dividend growth of 13% this year.
Even if that prediction is off by a few percentage points, the fact is that the stage is set for more payout growth this year and that could be good news for these dividend-paying ETFs.
1. WisdomTree Large Cap US Dividend Fund (DLN)
the WisdomTree U.S. Large Cap Dividend Fund (DLN) is one of the most venerable members of the dividend ETF landscape, especially among funds that don’t focus on yield. DLN turns 16 in June. More important than age is methodology.
The DLN components are weighted by dividends paid for the purpose of projecting member company payouts over the coming year. In other words, DLN is one of the dividend ETFs that really puts investors on the right track for payout growth – an increasingly important concept at a time when inflation shows few signs of slowing. . Inflation is likely to give way to higher interest rates, which also supports DLN’s case.
“Scarcity is another argument for dividends, as 50% of stocks in BofA Research’s U.S. coverage universe pay no dividends, up from 33% in 2014. Higher yields should also support growth. dividend growth as our economists expect the Fed to hike in March with 25 basis point hikes in each of the next eight quarters,” Bank of America adds.
2. Invesco Dividend Achievers ETF (PFM)
Speaking of growth, Invesco Dividend Achievers ETF (PFM) is one of the payment ETFs that really focuses on this concept. PFM tracks the NASDAQ US Broad Dividend Achievers Index, which requires member companies to have dividend increase streaks of at least a decade to be included. This is something to consider, as there is no guarantee that dividend growth will be widespread in 2022.
“In the S&P 500, companies still appear cautious of increases as they paid out the lowest percentage of quarterly profits in more than a decade, but still set a fourth-quarter dividend payout record. and in 2021,” said Howard Silverblatt, senior index analyst at S&P. Dow Jones indices. “As COVID continues to dominate the headlines, the market continues to post significant gains, which has reduced returns. Based on the historical rate of dividend increase and the current dividend rates shown, 2022 is on track to set another record in 2022, with COVID determining the amount of the increase.
PFM holds 348 stocks, with the tech and healthcare sectors accounting for more than 31% of the dividend ETF’s list.
3. ProShares S&P 500 Dividend Aristocrats (NOBL) ETF
the ProShares S&P 500 Dividend Aristocrats ETF (NOBL) is a dividend ETF designed for long-term investors who like reliability and reduced volatility. The fund tracks the S&P 500 Dividend Aristocrats Index, which requires 25-year streaks of dividend increases for companies to qualify.
Although NOBL has a strong value and defensive slant, it is a relevant consideration this year due to its inflation-fighting abilities and track record of lower downside capture than benchmarks. wider when markets falter.
“In a rising cost environment, a growing dividend stream takes on added importance for income investors,” says Kieran Kirwan, senior investment strategist at ProShares. “The growth of a dividend is perhaps the most obvious signal that management can send when they are confident in a company’s ability to generate consistent and growing cash flow and earnings, which are ultimately account the cornerstone of dividends. All other things being equal, more growth equals more confidence.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.