Dividend Growth Investing: A Bi-Weekly Chat with Insights and Predictions

This article discusses dividend growth investing, highlighting the performance of the investable universe and comparing it to the SPDR S&P 500 ETF and Schwab U.S. Dividend Equity ETF. It also mentions undervalued high-yield sectors and top picks, such as Brookfield Renewable Partners, and provides updates on dividend increase announcements from companies like Clorox.

Dividend investing has gained significant traction in recent years, particularly in the face of fluctuating global interest rates and market volatility. While dividend yields offer a stable source of income, the focus on dividend growth can enhance returns and provide resilience in uncertain economic conditions. This article explores the performance of dividend growth investing, comparing it to the SPDR S&P 500 ETF and the Schwab U.S. Dividend Equity ETF (SCHD), and highlights undervalued high-yield sectors and top picks.

Performance of Dividend Growth Investing

Dividend growth investing focuses on stocks that have a history of increasing their dividends over time. This strategy not only provides regular income but also offers potential capital appreciation. According to a recent analysis [2], dividend growth stocks have outperformed the broader market and dividend-paying stocks. For instance, stocks like Agnico Eagle Mines Limited (AEM), NetEase Inc. (NTES), Qifu Technology Inc. (QFIN), UGI Corporation (UGI), and McKesson Corporation (MCK) have demonstrated consistent dividend growth and strong earnings performance.

Comparison with SPDR S&P 500 ETF

The SPDR S&P 500 ETF (SPY) represents the broader U.S. equity market. While it offers broad market exposure and potential for capital appreciation, it does not focus on dividend growth. Over the past five years, the S&P 500 has returned approximately 15.2%, with an average dividend yield of around 1.5%. In contrast, dividend growth stocks have shown higher returns and more consistent dividend increases.

Schwab U.S. Dividend Equity ETF (SCHD)

The Schwab U.S. Dividend Equity ETF (SCHD) stands out as a paragon of dividend discipline. With a 3.9% dividend yield, a 0.06% expense ratio, and a portfolio of companies with over 10 years of dividend growth, SCHD provides a compelling alternative to higher-cost rivals like the Pacer Global Cash Cows Dividend ETF (GCOW) [1]. SCHD's ultra-low expense ratio and stringent selection criteria for financial strength make it an attractive choice for long-term investors seeking steady income and growth.

Undervalued High-Yield Sectors

Certain sectors offer high-yield opportunities that are often undervalued. For example, Brookfield Renewable Partners (BEP) is a top pick in the renewable energy sector, offering a high dividend yield and a commitment to growing its dividend annually. Other undervalued sectors include utilities, real estate investment trusts (REITs), and healthcare.

Dividend Increase Announcements

Companies like Clorox (CLX) have recently announced dividend increases, reflecting their commitment to shareholder returns. Clorox's dividend has increased by 13% year-over-year, demonstrating its financial strength and ability to sustain and grow its dividend payments.

Conclusion

In a volatile market, dividend growth investing offers a strategy that combines income generation with potential capital appreciation. The Schwab U.S. Dividend Equity ETF (SCHD) stands out as a superior choice for investors seeking a balance of yield, growth, and cost efficiency. By focusing on dividend growth stocks and undervalued high-yield sectors, investors can build a resilient portfolio that provides consistent returns and downside protection.

References

[1] https://www.ainvest.com/news/supercharge-schd-etf-big-dividend-machines-blueprint-passive-income-2507/
[2] https://finance.yahoo.com/news/5-top-ranked-dividend-growth-135700873.html