Forget Dividend Growth Slowdown With These ETFs

Dividends have been a consistent source of income for investors seeking regular returns during both bull and bear markets. This is because dividend-focused products offer safety in the form of payouts and stability in the form of mature companies that are less volatile to large swings in stock prices.

In the third quarter, global dividends hit a record, but the annual growth has decelerated sharply, signaling that “a marked slowdown is underway,” according to the quarterly survey by Janus Henderson.

Inside Q3 Numbers

Per the survey, global dividends in the third quarter grew 2.8% year over year to $355.3 billion. The growth rate is much below the year-ago quarter growth of 4.4%. The marked slowdown stemmed from a softening global economy, which has been hit by trade issues and geopolitical tension.

U.S. dividends touched a record with AT&T (T - Free Report) being the largest payer this year, followed by Apple (AAPL - Free Report), Exxon Mobil (XOM - Free Report) and Microsoft (MSFT - Free Report). AT&T has reclaimed its top position for the first time since 2012 thanks to its acquisition of Time Warner in 2018 as the combined company will distribute close to $14.9 billion in dividend.

Japan and Canada also saw third-quarter records while the United Kingdom’s dividends were boosted by very large special dividends from banks and miners. Meanwhile, Australia saw a big decline in dividends with two-fifths of companies cutting payouts. China also showed weakness with almost half the Chinese companies reducing their payouts.

Coming to sectors, energy saw the strongest dividend growth in Q3 mostly driven by Russian oil companies. China and Hong Kong, Canada and the United States also made a significant contribution to the increase. Basic materials’ sector growth was boosted by special dividends.

How to Play?

Amid dividend growth slowdown, investors should make a bet in a basket of dividend stocks via ETFs that carry lower risk and is a diversified play. In fact, the dividend aristocrats could be the most beneficial way. Dividend aristocrats are the blue-chip dividend-paying companies that have a long history of raising dividend payouts year over year. Investors should note that the dividend aristocrat funds offer more dividend growth opportunities when compared to the other products in the space but might not necessarily have the highest yields.

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