Find the sweet spot of revenue and growth with TDVG

With markets facing high volatility and many analysts predicting a recession among us, many investors view dividend-paying stocks as a potential safe haven. After all, when the broader market is down or stable, dividend payouts can be a crucial source of yield and serve as a good shock absorber.

A white paper published by T. Rowe Price asserts that “dividend growth stocks, which have historically been neither too cold during downturns nor too hot in speculative markets, are well positioned in the current environment and beyond”.

“Dividend growth stocks held up relatively well in the first half of the year,” wrote Tom Huber, portfolio manager of the T. Rowe Price Dividend Growth ETF (TDVG). “We believe that a thoughtful and nuanced investment in high-quality dividend producers can be an all-weather equity strategy. Market history shows that these types of stocks have tended to hold up better in downturns. bad times while capturing much of the upside in all but the most speculative markets.

While higher-yielding large-cap stocks have often been seen as a port in the storm, stocks in the highest dividend-yielding quintile of the Russell 1000 Index have exhibited greater volatility over time – and precisely when investor demand for security was at its highest. Indeed, the highest yielding quintile of the index now includes fewer defensive stocks and more cyclical stocks, which tend to be more sensitive to economic conditions.

Thus, the stocks targeted by T. Rowe are generally at what the company considers “the sweet spot for income and growth investing,” according to the white paper. T. Rowe believes that investing in companies with the potential for sustained dividend growth is a superior approach to outright pursuit of high dividend yields.

TDVG is an actively managed ETF that can hold traditional dividend-growing stocks when index funds can’t or won’t due to their methodology. It aims for dividend income and long-term capital growth.

According to T. Rowe Price, the ETF emphasizes stocks whose dividends are expected to increase over time. Where appropriate, the portfolio manager may also attempt to buy stocks when they are temporarily out of favor or undervalued by the market. Through TDVG, the company revolves around high-quality businesses that should be sustainable enough to maintain strong growth in earnings, cash flow and dividends. TDVG has an expense ratio of 0.5%.

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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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