A New Breed of Dividend Growth ETFs is Here

Coins on a table and in a pot with small tree, representing dividend growth.

Dear Investor,

As technology stock investors rotate out of money-losing, used-to-be growth stocks, focusing on dividend growth should serve investors well in these volatile times.

Two newer ETFs, offering both current yield and potential dividend growth, may be just what investors are looking for.

With a dividend growth strategy, dividend income provides a current cash return on investment, no matter what happens with stock prices. Meanwhile, growing dividends lead to higher share values, adding capital gains to the total return.

These two new ETFs take different approaches to the dividend growth strategy. Let’s look at each.

The Hoya Capital High Dividend Yield ETF (RIET) launched in September 2021. The fund pays monthly dividends and currently yields 6.8%. Hoya Capital is a real estate investment trust (REIT)-focused research firm, and the fund reflects that expertise.

The RIET (note the difference between the stock symbol and the initialism) portfolio consists of 100 stocks from five different subcategories. Here is the breakdown:

The portfolio should generate rising dividends over time. Hoya will reset the dividend rate every quarter and rebalance the portfolio semi-annually.

The InfraCap Equity Income Fund ETF (ICAP) launched last week on the New York Stock Exchange. Click here to see the InfraCap team ring the closing bell. The firm declared the first three monthly dividends, January through March, and ICAP also yields 6.8%.

This ETF will be actively managed, with at least 80% of the portfolio committed to dividend-paying equities. At the launch, the top five holders were Dow Inc. (DOW), AllianceBernstein Holding LP (AB), Exxon Mobil Corp. (XOM, Verizon Communications (VZ), and AT&T (T).

These holdings indicate that ICAP will focus on blue-chip dividend growth stocks. Here is the initial market sector breakdown of the portfolio:

Sector Allocation of Hoya Capital showing a wide diversification.

I regularly communicate at the CEO level with both management firms. They have both joined me on Dividend Hunter Insiders subscriber-only webinars to discuss their investment strategies and take questions (to join the next one, sign up for The Dividend Hunter and then follow the prompts to learn more about Insider membership).

I think both funds will produce above-average, long-term results using conservative investment strategies. I am curious to see how they’ll perform head-to-head. With the launch of ICAP, I made an equal investment in each fund to track real-life results.

Next month, the ICAP managers will join me on a webinar to discuss their new fund. This event makes it a great time to become a Dividend Hunter Insiders subscriber. Membership is only open to members of The Dividend Hunter – so sign up today.