Published Sun, 17 May 2020 09:26:37 -0400 on Seeking Alpha
On average, dividend growth ETFs have fallen harder than the overall stock market.
The ETFs with a selection criterion based on dividend history have not held up as well as ETFs with selection criteria based on dividend history as well as fundamentals.
My own approach to dividend growth investing.
One picture speaks a thousand words.
I took a representative sample of twelve US and international dividend growth ETFs and averaged how far these funds have fallen from their respective 52-week highs. These 12 funds are down 21.74% from their 52-week high on average, compared to the SPDR S&P 500 Index ETF (SPY) which is down 18.10% from its 52-week high. Overall, the dividend growth ETFs underperformed the broader market by 3.64% so far during the current bear market.
Only 4 of the 12 dividend growth ETFs have lost less than the S&P 500 - the Vanguard Dividend Appreciation ETF (VIG), the WisdomTree Quality Dividend Growth ETF (DGRW), the WisdomTree Global-ex US Quality Dividend Growth ETF (DNL) and the WisdomTree International Quality Dividend Growth ETF (IQDG). By far the worst performer is the Invesco International Dividend Achievers ETF (PID) with an agonizing 37.24% loss.
It's surprising how funds with similar investment goals and in some cases overlapping investment criteria could deliver such wildly disparate returns. What's going on? The main performance split seems to emerge between funds with an investment criterion based on dividend history and funds with investment criteria based on a blend of dividend history and fundamentals. For example, two of the worst performing ETFs don't seem to incorporate any fundamental analysis in their portfolio selection. Subject to certain eligibility requirements, the Invesco International Dividend Achievers ETF (PID) invests in portfolio companies based on the five-year dividend growth track record, and the SPDR S&P Dividend ETF (SDY) invests in companies with at least a 20 year dividend... Read more