Try These 3 Dividend Funds for Reliable Payout Growth

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dividend funds - Try These 3 Dividend Funds for Reliable Payout Growth

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Domestic dividend funds are still growing. Thanks in part to significant amounts of cash repatriated back to the U.S. following the recent tax cuts, S&P 500 member firms are boosting payouts.

“From the start of the year through May 18, 187 companies have either increased or initiated a dividend, the second-highest number through the first five months of the year since 2011,” reports CNBC, citing S&P Dow Jones Indices.

Providing a lift for income investors and dividend funds is the fact that the rate at which companies are boosting payout is climbing as well. That is good news for dividend investors, particularly at a time when interest rates are rising.

“The average dividend increase is also climbing compared to the recent past. So far this year, payouts have risen on average by 13.85 percent, the fastest pace since 2014, when dividends rose, on average, for the full year by 17.5%,” according to CNBC.

These dividend funds provide investors with exposure to stocks with not only lengthy histories of higher payouts but the ability to continue delivering higher dividends for years to come.

Dividend Growth Funds: WisdomTree U.S. Quality Dividend Growth Fund (DGRW)

WisdomTreeExpense ratio: 0.28% per year, or $28 on a $10,000 investment.

The WisdomTree U.S. Quality Dividend Growth Fund (NASDAQ:DGRW) turned five years old last month and has become a titan among dividend funds over that time. DGRW is not a complex dividend fund, but it is a departure from the traditional funds that emphasize steadily rising payouts.

Knowing that a company has raised its payout for 10, 20 or 50 consecutive years is nice and can be a tell about its dividend intentions. However, past dividend growth is just that: something that happened in the past. DGRW focuses on a combination of growth and quality factors to compile a portfolio that is more forward-looking in its approach to rising dividends.

This dividend fund was one of the first to feature Apple Inc. (NASDAQ:AAPL) among its top holdings along with a large technology sector allocation. Today, Apple remains a top-five holding in DGRW and tech is the dividend fund’s largest sector weight at almost 22%.

Over the past three years, DGRW has outperformed the largest U.S. dividend ETF by 430 basis points. This dividend fund delivers a monthly payout.

Dividend Growth Funds: First Trust Nasdaq Technology Dividend Index Fund (TDIV)

Expense ratio: 0.50% per year

Speaking of technology payouts, the First Trust Nasdaq Technology Dividend Index (NASDAQ:TDIV) is the first dividend fund specifically dedicated to this sector’s payout potential.

While technology has been one of the primary drivers of S&P 500 dividend growth during the current bull market, the idea of dividends in this sector is still relatively new compared to sectors such as consumer staples or industrials.

Said another way, TDIV’s holdings are mature tech companies. The likes of Alphabet Inc (NASDAQ:GOOGL) and Facebook, Inc. (NASDAQ:FB) do not pay dividends, but Apple, Microsoft Corporation (NASDAQ:MSFT) and Intel Corporation (NASDAQ:INTC), among others, do.

With interest rates rising, this dividend fund is worth considering.

Todd Shriber has been an InvestorPlace contributor since 2014.

“We believe that “old tech,” or value-oriented, tech stocks are ripe for dividend growth,” said Morgan Stanley. “Many of these companies have legacy enterprise hardware assets that provide substantial free cash flow to support investments into faster-growth areas like cloud computing and data analytics while continuing to return capital to shareholders.”

Dividend Growth Funds: FlexShares Quality Dividend Dynamic Index Fund (QDYN)

Expense ratio: 0.37% per year

The FlexShares Quality Dividend Dynamic Index Fund (NYSEARCA:QDYN) often goes overlooked in the dividend funds conversation, but that should not be the case. This dividend fund’s strategy is rooted in quality, an investment factor that can help identify not only a company’s commitment to dividends but its ability to continue growing payouts.

By using several lenses to evaluate financial health, an investor can gain a strong sense of how well-positioned a dividend paying company is for success, and how protected future dividends are under current market and economic environments,” according to FlexShares.

Like the other dividend funds highlighted here, QDYN is tech-heavy with a 22.5% weight to that sector. Financial services and consumer discretionary stocks, two other recent sources of impressive dividend growth, combine for 28% of QDYN’s weight.

This dividend fund is up 14% over the past year and yields nearly 2.7%. Over half of QDYN’s holdings are classified as value stocks.

As of this writing, Todd Shriber owns shares of DGRW.


Article printed from InvestorPlace Media, https://investorplace.com/2018/06/try-these-3-dividend-funds-for-reliable-payout-growth/.

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