Is now the time for dividend investing to reclaim its role in investors’ portfolios? Following a disappointing 2023 compared to hot mega-cap tech stocks, their addition of current income could help manage a volatile outlook. Adding an active approach to the dividend world combines a potential rebound in dividend investing with big momentum from last year’s active boom, too.
Dividend Investing in 2024
Investors may be looking for “durable” firms with solid dividends. Current income can help portfolios, particularly if popular, over-concentrated areas underperform. Should the so-called “Magnificent Seven” not replicate their numbers from last year, dividend-paying companies in the tech space can still meet tech allocations while adding direct income.
Sticking to the tech example, dividends not only add income but also key data points. Dividends can indicate which firms might be better positioned for a broader economic slowdown. An active approach that looks out for such firms that also stand out based on other factors could appeal.
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That’s where an active ETF like TDVG, the T. Rowe Price Dividend Growth ETF, can play a role. TDVG charges 50 basis points (bps) to take an active approach to dividends. TDVG hit its three-year mark last year, looking for firms with above-average earnings and a track record of dividend growth. The ETF looks for other attributes, too, like solid balance sheets and cash flows, sustainable market position, and attractive valuations.
Taken together, that’s helped TDVG return 9% over the last three months and 9.7% over the last year. Over both durations, it’s outperformed its Factset Segment averages, too. The strategy also still holds more than $300 million in AUM, as well. If dividends do better this year, presenting one strong option to mitigate interest rate or events-driven volatility, an active approach to dividend-paying stocks could boost an overall portfolio.
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