Income-oriented investors may consider an actively managed dividend-traded fund strategy to help stay ahead of inflation.
the SmartETF Dividend Builder ETF (NYSE Arca: DIVS) is an actively managed dividend growth strategy that seeks out dividend paying companies that have provided an inflation-adjusted cash flow return on investment of at least 10% in each of the past 10 years. The ETF invests in around 35 dividend paying companies around the world.
The SmartETF Dividend Builder ETF was recently converted from a mutual fund, the Guinness Atkinson Dividend Builder Fund (Nasdaq: GAINX). The strategy continues to be managed by Dr Ian Mortimer and Matthew Page.
“DIVS invests with a quality bias. We are looking for companies that have growing dividends, consistently high rates of return on capital and low levels of leverage, ”according to SmartETFs.
“DIVS provides access to high quality dividend producers in a single transaction. “
The SmartETFs Dividend Builder ETF tracks high-quality global dividend producers or companies with a long history of consistently high return on capital. SmartETFs argue that traditional dividend strategies that focus on a high dividend yield or a history of dividends are flawed approaches.
“We believe both of these strategies are flawed because they often fail to identify the factors that generate the dividend,” according to SmartETFs.
When building the DIVS portfolio, the portfolio managers perform a detailed review to look for persistent cash flow or companies that have achieved real investment cash flow of at least 10% on equity for each of the past 10 years. Companies have healthy balance sheets or low debt levels. Additionally, portfolio managers target value or buy stocks at a time when target companies are trading at the bottom of their peers, bottom of history, and bottom of their industry.
“All of this is intended to produce a portfolio of dividend paying companies that has the potential to be able to increase their dividends steadily over time,” concludes SmartETFs.
For more news, information and strategy, visit Dividend Channel.