When It Comes To Dividends, Looking Back May Cost You

Today, some of the most widely followed exchange-traded funds (ETFs) that focus on dividend growth employ backward-looking growth screens that require a company to have paid-and in some cases raised-dividends for 5, 10 or even 20 years before becoming eligible for inclusion. This seems like a smart idea, but it keeps many investors from capitalizing on shifting trends in the dividend landscape, specifically when it comes to newer payers and firms recovering from recent dividend contractions.

Dividends have been growing at an incredible pace in recent years, and the Information Technology sector has led the charge, accounting for more than 45% of the increase in dollar dividends. But investors in ETFs that use backward-looking growth screens may not see many of these dividend leaders in their portfolios, potentially for many years.

Source: Seeking Alpha

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