What’s better than dividend income? Growing dividend income. Dividends can grow over time and historically have grown at a rate that exceeds the rate of inflation.
DIVS takes a thoughtful approach. Many dividend growth ETFs focus on the dividend history. We prefer to look at the economic fundamentals of each company.
DIVS invests with a quality bias. We seek companies that have growing dividends, persistently high rates of return on capital, and low levels of debt.
DIVS offers access to high-quality dividend growers in a single transaction. DIVS generally holds approximately 35 equally weighted positions.
The SmartETFs Dividend Builder ETF invests globally in high quality dividend growers; companies with a long history of persistently high return on capital.
Other dividend strategies often focus on one of the following:
1. High dividend yield
2. History of the dividend
We believe that both of these strategies are flawed, as they often fail to identify what factors are generating the dividend. When building the DIVS portfolio, portfolio managers perform a detailed review to seek the following:
– Persistent cashflow: We seek companies that have achieved a real cash flow on investment of at least 10% on capital for each of the last 10 years.
– Sound balance sheets: We seek companies that have low levels of debt.
– Value: We seek to purchase shares at a time when target companies are trading at the low end of their peers, low end of their history, and low end of their industry.
All of this is meant to produce a portfolio of dividend paying companies that has the potential to be able to grow their dividends consistently over time.
The SmartETFs Dividend Builder ETF seeks a moderate level of current income and consistent dividend growth at a rate that exceeds inflation.