Global dividends fell at the fastest pace since mid-2015 in Q3 as American dividend growth slowed to a post-crisis low.
According to the Henderson global dividend index, U.S. payouts fell to $100.4B, down 7% on a headline basis.
Payments were constrained by subdued profit growth, which can partly be explained by a strong dollar, alongside higher levels of debt, causing management to take a cautious approach when deploying cash.
While REITs may be synonymous with dividend investing, some popular dividend ETFs contain zero real estate exposure. Among them are the Vanguard Dividend Appreciation Index (NYSEARCA:VIG), with a $22B in assets and a 2.1% yield, and the iShares Select Dividend ETF (NYSEARCA:DVY), with $16B in assets and a 3.1% yield.
The SPDR S&P Dividend Fund (NYSEARCA:SDY), on the other hand, has 9% exposure to REITs vs. the S&P 500's 3% exposure. The WisdomTree MidCap Dividend Fund (NYSEARCA:DON) has 16% exposure to the new GICS sector for real estate. The PowerShares S&P 500 High Dividend Low Volatility ETF (NYSEARCA:SPHD) has a 14% real estate weighting.
CFRA's Todd Rosenbluth: "Don’t make assumptions. Asset managers use the GICS classification system to report their exposure to various regardless of which index the fund follows. Investors can now easily see for themselves how much exposure a particular fund has to REIT stocks."
Top 10 Holdings as of 8/31/2016: ONEOK Inc (OKE): 2.65651%, Mattel Inc (MAT): 1.45713%, CenterPoint Energy Inc (CNP): 1.28361%, Frontier Communications Corp Class B (FTR): 1.10651%, Coach Inc (COH): 1.05319%, Macquarie Infrastructure Corp (MIC): 0.97241%, Microchip Technology Inc (MCHP): 0.92968%, CMS Energy Corp (CMS): 0.8697%, SCANA Corp (SCG): 0.85871%, The Western Union Co (WU): 0.82708%
Top 10 Holdings as of 2/29/2016: Cal-Maine Foods Inc (CALM): 1.49%, Targa Resources Corp (TRGP): 1.45%, Innoviva Inc (INVA): 1.1%, Covanta Holding Corp (CVA): 0.98%, Regal Entertainment Group (RGC): 0.94%, Black Hills Corp (BKH): 0.85%, ALLETE Inc (ALE): 0.81%, Pattern Energy Group Inc Class A (PEGI): 0.75%, The Laclede Group Inc (LG): 0.75%, WisdomTree MidCap Dividend ETF (DON): 0.72%
According to S&P Dow Jones, 1,078 companies boosted dividends in Q1, 14.2% more than a year ago, and besting the previous record of 1.069 set in 1979. The dollar amount of increases foots to $17.8B, 22.9% higher than a year ago. A few cut payouts - 102 out of roughly 10K traded issues, and down from 139 a year ago.
The weighted dividend yield grew 4 basis points during the quarter to 2.48%, says S&P's Howard Silverblatt. Room to grow even more? Payout ratios continue to scrape by at 36% vs. their historic average of 52%.
The First Trust Value Line Dividend Index ETF (FVD +0.2%) has done its job well, writes Morningstar's Abby Woodham, but the 70 basis point expense ratio is "a relic of the days before the ETF price wars." It may have been acceptable a decade ago, but is "unjustifiable" when similar ETFs are available for just a handful of basis points per year.
FVD's portfolio looks like a low-vol strategy that emphasizes yield, she writes, and the 5-year standard deviation is one of the lowest among dividend ETFs.
Possible alternatives: Vanguard Dividend Appreciation (VIG +0.1%) with 0.10% expenses, Vanguard High Dividend Yield Index (VYM -0.1%) also charging 10 bps, Schwab U.S. Dividend Equity ETF (SCHD +0.1%) - the cheapest in the category at 0.07% - SPDR S&P Dividend (SDY +0.1%) with 0.35% expenses, WisdomTree Equity Income (DHS) with 0.38% expenses, and iShares Select Dividend (DVY +0.3%) charging 0.40%.