Interest rates are rising this year. While the Fed has penciled in three rate hikes in 2018, there are concerns that they may raise rates more aggressively if the tax cuts cause the economy to overheat.

Recent inflation data has also been strong, leading to the possibility of higher rates.

The Fed started shrinking its balance sheet last year and other major central banks are set to decease their bond purchases. And thus, after adding cheap money to the markets for almost a decade, central banks are expected to be withdrawing money from markets by the end of 2018.

In view of the rising rates scenario, investors may like to avoid high dividend ETFs that have a lot of exposure to rate-sensitive sectors, as these sectors underperform when rates start rising. On the other hand, cyclical sectors are likely to do well in the rising rate scenario.

Companies that consistently grow their dividends are usually high-quality companies that deliver an excellent risk-adjusted return in the longer-term. Such companies usually have solid balance sheets and strong cash flows. So, these strategies outperform the market over time and also provide stability and downside protection during market downturns, in addition to growing income streams.

Many US companies have a lot of cash on their balance sheets and with tax reform, they are likely to continue increasing their dividend payouts.

Dividend Growth ETFs are excellent options for investors looking to invest in such companies.

The WisdomTree U.S. Quality Dividend Growth Fund (DGRW  - Free Report) holds dividend-paying large-cap companies with growth characteristics. It uses a forward-looking growth screen to identify companies that have greater potential for future dividend growth.

The iShares Core Dividend Growth ETF (DGRO - Free Report) holds companies that have a history of consistently growing their dividends and weights them by dividend dollars.

Both these ETFs have very little exposure to rate-sensitive sectors and would be good choices for investors worried about the rising rate environment.