DGRO: Dividend Growth Is A Good Strategy, But This ETF Has Some Serious Limitations

Summary

• I am supportive of the general idea of dividend growth investing since it is a simple but powerful way to select high-quality stocks.
• DGRO offers one interpretation of a dividend growth strategy and has provided strong results since its 2014 inception, especially in weaker periods for the broader market.
• Nonetheless, I am concerned that its stock selection is too simple and robotic, especially the rule that disqualifies the highest 10% yielding stocks available.
• As a Buffett-inspired value investor, I find it very difficult to endorse an ETF which rejects holdings simply because their market prices have fallen to a level, which inflates yield.

Fotoatelie

Investment Thesis

Selecting stocks for investment because of dividend growth is a very easy-to-understand strategy. A firm being able to consistently grow dividends over the years tends to be a very effective indicator of a high-quality business with financial

Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.