One reason the portfolio has done well is that the companies have been doing well.
"Despite the financial crisis, the companies that we own in the portfolio have averaged dividend growth of just under 13% a year for the last five years," he says. "He has been able to build a concentrated portfolio of companies that are really performing right now."
Bruno del Ama, CEO of Global XFunds, a New York-based firm with $1.7 billion in managed assets, presided over the launch of the new Global X SuperDividend (SDIV) ETF on Thursday. The exchange traded fund, which seeks to replicate the Solactive Global SuperDividend Index, debuted, in part, as a response to the demand and focus on dividend-paying stocks.
"We are in an interest-rate environment where the interest rates are so tight that it's very difficult to get any significant income from fixed-income securities," del Ama says, adding that demographic trends make this a top-of-mind issue."You have more and more people who either are nearing retirement, or just retired," he says. "They suffered significant stresses in their portfolio during the 2008 period and find themselves with less capital and some losses. Everybody has a longer life expectancy, so what can you do to preserve the capital but at the same time generate income? That is the big-picture driver behind the demand for income-related products." The strategy behind the two funds offers some strategies for investors to consider. The two funds take different approaches. The Vanguard Dividend Growth Fund holds a carefully weighted portfolio of about 50 companies, mostly domestic, that are deemed top performers in terms of dividend yield, underlying stock price and the "high-quality" nature of the firms and their balance sheets. Quality means a company that may suffer from volatility and uncertainty but it won't "go belly-up or need a government bailout," Newhall says. In the past, financials were the sector that dividend-seekers flocked to. That's no longer the case, especially with government regulators restricting dividend payouts for bailed-out banks. Nevertheless, the fund does hold, and is confident, in PNC Financial Services (PNC), with a dividend of $1.40 and a yield of 2.4%, and Wells Fargo (WFC), with a $0.48 dividend and a yield of 1.8%.
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