Dividend ETFs’ Established Track Record Looks Attractive in 2024

In this part of etf.com's Dividend Content Series, experts say the asset class has proven resilient, even as it continues to grow.

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Reviewed by: etf.com Staff
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Edited by: Ron Day

It’s all too fashionable to ask whether an investment—in this case dividend ETFs—stands at some sort of crossroads. Truth be told, the asset class as a whole looks robust. There are 171 such ETFs available today, with more than $390 billion in assets and an appealing average expense ratio of 0.51%. 

Here’s the rub: “dividend distraction,” if you will. T-bills are looking pretty darn good these days, with annualized returns of 5.2% for the three-month variety. And spot bitcoin ETFs, approved earlier this month by the Securities and Exchange Commission, have been on everyone’s lips lately, with the next stop their pocketbooks. (Never mind that this headline-grabbing crypto is down nearly 7% over the past five trading days.) 

Dividend ETFs at a Crossroads? 

Then there’s the broader market itself. The S&P 500 returned more than 26% in 2023 and while it’s unwise to expect a repeat, a lot of folks are sinking considerable dough into the market. But it’s one that could in turn sink with what looks like a slowing economy and a toxic presidential campaign ahead.  

So, in terms of dividend ETFs, it’s not so much a crossroads but more of a traffic jam (with lots of distracted drivers). And it’s safe to say there’s no rubbernecking at offerings such as the ProShares S&P 500 Dividend Aristocrats ETF (NOBL)—up 16% over the last three years. Every single spot bitcoin ETF, by contrast, has a track record of about nine weeks.

Dividend Investing ‘Certainly Not Outdated’

“Dividend investing is certainly not outdated, including in the realm of ETFs,” said June Jia, a quantitative researcher at GF Securities and owner of Canny Trading. “As we progress, the importance of risk management is likely to rise. Dividend ETFs offer a straightforward way to diversify investment portfolios and mitigate risks.” 

Interestingly, the term “risk mitigation” could well apply to riskier ETFs, especially those of the spot bitcoin variety. You’ve got the contrast of Vanguard Dividend Appreciation ETF (VIG), for example, as a pioneer in the dividend space, dating to 2006. Meanwhile, Vanguard has refused to enter the spot bitcoin arena, despite investor backlash.

Dividend ETF Outlook for 2024

So, what about the new year, anyway? Many experts agree that it’s high time for investors and advisors to consider what they may be missing. For example, the SPDR S&P Emerging Markets Dividend ETF (EDIV) has shot up 25% year over year. There’s some high-octane FOMO for you. 

“Many dividend-oriented securities and ETFs, which typically are value in approach, look cheap relative to growth,” said Nick Elward, Sr., SVP, Head of Institutional Product and ETFs at Natixis Investment Managers in Boston. 

The numbers indeed tell the story, says Dina Ting, Head of Global Index Portfolio Management Team, Franklin Templeton ETFs, in San Mateo, California. 

“Over the past 5 years, we’ve seen 15 new rules-based dividend ETFs launch in the U.S., drawing a combined $1.5 billion in assets,” Ting noted. “Net flows have increased at a five-year compound annual growth rate of 18%.” 

Dividend ETFs’ Long-term Track Record

“Looking back at the last decade, dividend ETFs have been on a notable ascent," said Sean Carpenter, Chief Executive Officer of Chicago-based StockAlarm. “Despite the typical ups and downs of the market, these funds have shown remarkable resilience, thanks to their focus on financially stable companies.” 

Granted, dividend ETFs may not qualify as a fast-lane proposition in the eyes of many. But as many investment classes face an uncertain future this year, there’s a case to be made that dividend ETFs, many invested in value stocks, provide a steady ride on an alternate route to prosperity.  

As Jia put it: “The relative stability of dividend ETFs compared to individual stocks, coupled with their higher returns compared to traditional savings, will likely draw more investor interest.” 

Lou Carlozo is editor and publisher of Talking Biz News, a business journalism website. He is also the host and creator of the Bankadelic podcast, and a Pulitzer Prize finalist and Polk Award winner as a team reporter. Carlozo is also a former Chicago Tribune columnist, editor and staff writer.