• Warren Buffett
  • Volvo
  • NASDAQ Composite Index
  • 10 Year Treasury
  • Commercial Banks
  • JPMorgan Chase
  • Emerging Markets
  • Commerce Department
  • Stock Market
  • Home
  • Practice Management
  • Research & Insights
  • Alternatives
  • ETF Managed Portfolios
  • Home>Research & Insights>Investment Insights>Not All Dividend ETFs Are Created Equal

    Not All Dividend ETFs Are Created Equal

    It's important to look beyond these funds' label and understand what is in the tin.

    Ben Johnson, 08/25/2017

    A version of this article appeared in the July 2017 issue of Morningstar ETFInvestor. Download a complimentary copy of ETFInvestor here

    Exchange-traded products that are labeled with the "dividend-screened/weighted" attribute within Morningstar's strategic-beta taxonomy represent the largest contingent of this universe as measured by assets under management. As of the end of May 2017, these funds collectively held $162 billion of investors' assets. This represents 26% of the $620 billion in the broader strategic-beta group.

    This group has been growing at a blistering pace in recent years. During the trailing decade, dividend-oriented ETPs have attracted nearly $117 billion in new assets.

    This should come as little surprise in the context of the prevailing interest-rate regime and the secular upward trend in demand for sources of investment income, as the first waves of baby boomers have entered retirement.

    Asset managers have taken notice, and product proliferation is in full swing. Of the 158 dividend-screened/weighted ETPs that exist today, more than half are less than five years old (see Exhibit 2). As the menu of dividend-oriented ETPs expands, it is important that investors understand that not all dividend ETPs are created equal. Each has its own unique characteristics, which stem from important--albeit often nuanced--differences in the methodologies of their underlying benchmarks. Understanding three key characteristics of these funds can help investors make more-informed choices. To help you better discern the distinctions between these funds, I will focus on three specific characteristics: dividend yield, dividend growth, and dividend sustainability.


    Ben Johnson is Morningstar’s Director of European ETF Research.