After getting off to a relatively good start to 2021, dividend stocks and ETFs have spent most of the past five months lagging the broader market. Periods where cyclicals have been in favor resulted in decent performance for certain group, particularly high yielders, since those tend to be overweight in financials and energy. Other dividend groups haven't fared quite as well. With growth sectors, such as tech and consumer discretionary, outperforming the market recently, it's been tough sledding for those looking to pick winners among dividend payers.
November was such a month. While dividend ETFs, in general, underperformed, very few of them posted any positive return at all - just four of them in total, two of which target the tech sector. The ones that do appear in the top performers list tend to fall in either the quality dividend or dividend growth buckets. In other words, funds that focused on high yielders or the riskier end of the dividend stock universe likely underperformed.
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Among other trends in November, don't expect to find much in the way of international dividend ETFs. Both developed and emerging markets badly underperformed the S&P 500 again for a number of reasons. Emerging markets dividend ETFs have been offering yields of 5-7%, but so far they've largely failed to deliver on a total return basis. There are a few high yield funds on this list, including some familiar names, but November mostly belonged to the conservative end of the spectrum.
Here's the list of the top performing dividend ETFs for November 2021.
Tech was the best performing sector overall in November, so it's no surprise to see tech-focused dividend ETFs - the First Trust NASDAQ Technology Dividend Index ETF (TDIV) and the ProShares S&P Technology Dividend Aristocrats ETF (TDV) - sitting atop this list. TDIV aims for broader coverage of tech dividend payers, while TDV includes only those that have raised their dividends for at least 7 years.
The Siren DIVCON Leaders Dividend ETF (LEAD) was the best performing dividend ETF of October, gaining almost 8%, and nearly pulled off a repeat in November. LEAD uses a quantitative process to target large-cap dividend growth stocks with the highest probability of increasing their dividends over the next 12 months.
FlexShares lands a trio of its largest dividend ETFs in the top 10 - the FlexShares Quality Dividend Dynamic Index ETF (QDYN), the FlexShares Quality Dividend Defensive Index ETF (QDEF) and the FlexShares Quality Dividend Index ETF (QDF). All three use the same proprietary process that focuses on profitability, cash flow and management efficiency in the stock selection process. The difference between the three? QDEF targets a portfolio beta of 0.5-1.0, QDF targets a beta of around 1.0 and QDYN targets a portfolio beta of 1.0-1.5.
WisdomTree has a diverse lineup of dividend ETFs and lands a total of 7 names on the top 30 list. The WisdomTree U.S. Quality Dividend Growth ETF (DGRW) is perhaps the best of the bunch, but all fill in important portfolio gaps. The WisdomTree U.S. LargeCap Dividend ETF (DLN) and the WisdomTree U.S. Total Dividend ETF (DTD) should be fairly self-explanatory. The WisdomTree U.S. SmallCap Quality Dividend Growth ETF (DGRS) would be the small company counterpart to DGRW. The WisdomTree U.S. High Dividend ETF (DHS) is one of the only high yield dividend ETFs to crack the list.
Other ETFs worth noting:
The dividend ETF heavyweight - the Vanguard Dividend Appreciation ETF (VIG) - cracks the bottom half of the list. All in all, it's been a fairly good year for VIG landing in the top half of dividend growth ETFs year-to-date. Outside of DGRW, the iShares Dividend Growth ETF (DGRO) is the only other "giant" dividend ETF on this list.
The Global X SuperDividend U.S. ETF (DIV) simply invests in 50 of the highest yielding stocks in the United States. That lends itself to a larger than average weighting in REITs, but it's also heavily exposed to consumer staples, energy, industrials and utilities. Given its composition, I wouldn't have expected to see it show up on this list, but it did.
The presence of the Legg Mason Low Volatility High Dividend ETF (LVHD) and the VictoryShares U.S. Small Cap High Dividend Volatility Weighted ETF (CSB) shows that the low volatility factor did a little better than high beta in November, but nothing to indicate a broader turnaround.
The Fidelity Dividend ETF For Rising Rates (FDRR) is an interesting addition given the focus on inflation and interest rates nowadays. The fund invests in stocks that have historically demonstrated a positive correlation to longer-term Treasury yields, so it has heavier allocations to financials, consumer discretionary and healthcare as well as a healthy investment in tech stocks.
SmartETFs lands a pair of its funds - the SmartETFs Dividend Builder ETF (DIVS) and the SmartETFs Asia Pacific Dividend Builder ETF (ADIV) - in the top 30. The dividend builder philosophy generally follows the dividend growth theme but also looks at company fundamentals, cash flows and balance sheet health to identify that can consistently raise their dividends in the future.