Play These Dividend Growth ETFs to Combat Coronavirus

Sweta Jaiswal, FRM

The coronavirus outbreak that started from Wuhan, China has now spread to almost 28 countries. The outbreak is already responsible for taking 2,130 lives globally, along with around 75, 762 confirmed cases being recorded. Moreover, new fatalities have been recorded from South Korea and Japan outside the mainland China. The minutes release from the Fed’s FOMC meeting held at the end of January, when the outbreak had just begun to get severe, also states coronavirus as a ‘new risk to global growth outlook’. In addition, a draft prepared for the meeting of G20 finance ministers and central bank governors to be held in February states the coronavirus outbreak to be a major threat to global economic growth.

The virus outbreak is largely disrupting the global supply-chain patterns. Companies are struggling to procure some important parts from China due to the continued shutdown of the manufacturing facilities in the nation. Hence, analysts at Oxford Economics project that the coronavirus outbreak globally can disrupt the GDP by 1.3% or $1.1 trillion in lost output, if it turns into a pandemic. Further, Kristalina Georgieva, head of the International Monetary Fund, noted that the Covid-19 outbreak is the “most pressing uncertainty”, which the global economy has to deal with right now (read: ETF Areas That Can Stay Strong Amid Covid-19 Outbreak).

Dividend Growth ETFs for a Healthy Portfolio

The appeal of dividend ETFs has been rising in the face of waning yields, easing monetary policy on the global front, and market uncertainty triggered by geopolitical worries and deceleration in global growth. This is because dividend-paying securities are major sources of consistent income for investors when returns from equity markets are uncertain.

Although there are plenty of options in the dividend ETF world, ‘dividend aristocrats’ or ‘dividend growers’ could be the smartest way to deal with the current market turmoil. Here are a few ETFs to consider:

Vanguard Dividend Appreciation ETF VIG — up 4.7% year to date

This is the largest and most popular ETF in the dividend space, with an AUM of $44.37 billion. The fund follows the NASDAQ US Dividend Achievers Select Index, which is composed of high-quality stocks with a record of raising dividends every year. It holds 182 securities in the basket and charges 6 basis points (bps) in annual fees. VIG has a Zacks ETF Rank #2 (Buy), with a Medium-risk outlook (read: Guide to 10 Most Popular Dividend ETFs).

ProShares S&P 500 Aristocrats ETF NOBL — up 0.5%

This product provides exposure to high-quality companies that have not just paid dividends but have hiked the same for at least 25 consecutive years, with most doing so for 40 years or more. It follows the S&P 500 Dividend Aristocrats Index, holding 57 securities in its basket. NOBL has amassed $6.76 billion in its asset base. It has an expense ratio of 0.35% and a Zacks ETF Rank #3 (Hold), with a Medium-risk outlook (read: 7 Dividend ETFs That Offer Growth in 2020).

iShares Core Dividend Growth ETF DGRO — up 2.1%

This fund provides exposure to companies boasting a history of sustained dividend growth by tracking the Morningstar US Dividend Growth Index. Holding 478 stocks in its basket, the fund has an AUM of $11.01 billion. It charges 8 bps in fees per year and has a Zacks ETF Rank of 2, with a Medium-risk outlook (read: Dividend Growth ETFs for Long Term Investors).

First Trust NASDAQ Rising Dividend Achievers ETF RDVY — up 2.1%

This fund lends exposure to a diversified portfolio of 51 companies with a stellar dividend payout history. It tracks the NASDAQ US Rising Dividend Achievers Index, charging investors 50 bps in annual fees. The ETF has accumulated $1.30 billion in its asset base. It has a Zacks ETF Rank of 3, with a Medium-risk outlook (read: Don't Panic About Virus, Buy 5 Beaten-Down Top-Ranked ETFs).

Invesco Dividend Achievers ETF PFM — up 3.3%

With $326.5 million, this fund offers exposure to 258 companies that have raised dividends for 10 or more straight fiscal years. It has expense ratio of 0.54%. PFM is a Zacks #3 Ranked ETF, with a Medium-risk outlook.

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