Dividend Growth Returned In 2021

Dividend Growth Returned In 2021

Even within the same dividend style, ETF returns can be quite different. 

Reviewed by: Todd Rosenbluth
Edited by: Todd Rosenbluth

Key Takeaways

  • In the U.S., the number of companies that either initiated or raised dividends in 2021 rose 53% from a year earlier and was the highest since 2014. Meanwhile, 82% fewer companies took dividend actions, negatively impacting shareholders last year.
  • iShares, State Street Global Advisors and Vanguard offer both dividend-growth- and dividend-yield-focused ETFs that are constructed differently.
  • However, even within the same dividend style, the ETF returns can be quite different. For example, the SPDR Portfolio S&P 500 High Dividend ETF (SPYD) outperformed the iShares Core High Dividend ETF (HDV) by more than 1,000 basis points in 2021.



Fundamental Context

In 2021, companies returned to their dividend-paying ways after a dreary 2020. There were 2,910 U.S. companies that either initiated or raised the common dividends being paid to shareholders in 2021, a 53% increase from a year earlier, according to S&P Dow Jones Indices.

The number of positive actions that occurred was the most in a calendar year since 2014, when 3,308 were taken, and is a sign of confidence that the near-term impact of COVID-19 on corporations is diminished from a year ago.

Meanwhile, just 170 companies took a negative dividend action in 2021, by either cutting or suspending their dividend. This total was not just 82% lower than it was in 2020, it was lower than in any of the past eight years.

At the end of 2021, 78% of companies in the S&P 500 Index were paying a dividend, up from 76% a year earlier, while 64% and 51% of S&P MidCap 400 and S&P SmallCap 600 constituents sported one, up from 60% and 47%, respectively.


No. Of Dividend Actions Taken By US Public Companies

Source: S&P Dow Jones Indices. Positive actions include increases or initiations; negative actions include cuts or suspensions.


Many large asset managers offer multiple dividend ETFs to consider, but they can perform differently based on how they are constructed. In general, there are two types of dividend ETFs: those focused on companies exhibiting dividend growth traits; and those focused on companies with high dividend yields.

Upon review of the ETF holdings, dividend growth-oriented ETFs, such as the iShares Core Dividend Growth ETF (DGRO) and the Vanguard Dividend Appreciation (VIG), tend to have more exposure to cyclical sectors, such as financials, industrials and information technology.

Meanwhile, dividend-yield-constructed ETFs, such as HDV and SPYD, typically have higher exposure to defensive sectors, such as consumer staples, health care, real estate and utilities.

While U.S. dividend growth and/or dividend-yield ETFs have similarities to one another, what is inside is often different, and this impacts performance.

For example, the $27 billion DGRO rose 26.6% in 2021 and outperformed the $43 billion VIG by 280 basis points.

Meanwhile, the $5 billion SPYD gained 32.3% last year, beating the $8 billion HDV by more than 1,200 basis points.

Of course, past performance is not indicative of future results. At CFRA, our star ratings process incorporates holdings-level analysis with fund attributes, such as performance and costs. We favor DGRO and VIG over HDV and SPYD to start 2022.


Dividend ETF Examples Offered By Top 3 ETF Providers

FundTickerDividend Approach2021 Total Return (%)Assets ($B)
Vanguard Dividend Appreciation  VIGGrowth23.870
Vanguard High Dividend YieldVYMYield26.243
iShares Core Dividend GrowthDGROGrowth26.623
SPDR S&P Dividend SDYGrowth25.321
iShares Select DividendDVYYield31.720
iShares Core High DividendHDVYield19.58
SPDR Portfolio S&P 500 High DividendSPYDYield32.35
Total       190

Source: CFRA’s ETF Database. As of December 31, 2021



Even though interest rates are likely to climb higher in 2022, CFRA expects investors to continue to gravitate toward diversified dividend ETFs. Before doing so, we encourage a close look inside, because each portfolio is constructed differently.


All of the views expressed in this research report accurately reflect the research analyst’s personal views regarding any and all of the subject securities or issuers. No part of the analyst’s compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this research report. For more information and disclosures, please refer to CFRA’s Legal Notice at https://www.cfraresearch.com/legal/.

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Todd Rosenbluth is director of ETF and mutual fund research at CFRA, an independent research firm that acquired S&P Global Market Intelligence’s equity and fund business in October 2016. Follow him at @ToddCFRA.