Trust me. You want to buy dividend growth investments. Don’t doubt me on this. Dividend growth signals something about the company paying the dividends. One thing it says is that management sees you as a co-owner and that you deserve to see some immediate benefits from being a part owner of the company. It is true that newer companies and high-growth companies may not be able to pay a dividend. However, paying a dividend doesn’t stifle growth. I believe it helps company management make better decisions, as the worst thing they can do is cut a dividend. Even Microsoft and Apple realize that paying a dividend is a wise use of the profits from their huge businesses.
There are, however, different kinds of dividend investments and ETFs that are tailored to different needs. There are dividend growth ETFs, dividend income ETF’s, dividend growth and income ETFs and even more specialized dividend-paying ETFs. In the November 2019 AAII Journal (page 29), there is a nice table that shows these categories. In the “Dividend Growth” category the following ETFs were listed: RDIV, OUSA, NOBL, REGL and CDL. RDIV is “Oppenheimer Ultra Dividend Revenue ETF.” But as with all things in life, let the buyer beware. Something may be “ultra” but it might not be ultra-dividend for the wise investor. Look at the graph on this post from ETFREPLAY. I believe ETF DGRO is a better solution. One of the reasons I like DGRO is the top holdings include Apple, Microsoft, JP Morgan, Johnson & Johnson, Pfizer, The Home Depot and Abbvie. DGRO also has a lower expense ratio and DIVIDEND GROWTH.
So here is a lesson in reading even publications like the reputable AAII Journal. Just because the ETF is listed in “Dividend Growth” doesn’t necessarily mean it is a good dividend growth solution. And just because a fund calls itself “dividend growth” also doesn’t mean it is going to produce dividend growth.
WALLMINE LINK FOR RDIV: https://wallmine.com/etf/RDIV