There are two potential sources of return for common equity: price appreciation (capital gains) and dividend income. Dividends tend to be a much more predictable source of return than capital gains (although not all companies pay them), so it’s no surprise they’re often a sought-after feature for investors.
Dividend-focused investing strategies invest in dividend-paying companies. These companies represent a significant portion of the global equity market and span across all sectors, providing great opportunities for diversification.
Let’s take a look at what’s behind the power of dividend-focused investment strategies, exploring the benefits, downfalls and potential to achieve better risk-adjusted results.
As ETFs grow in number and popularity, so does the number of dividend-focused strategies in the space. Historically, dividend ETF investing has been dominated by two strategies:
The downside: Many investors have learned that high yields may not be sustainable and can be red flags, indicating declining stock price and potential issues within a company, which can lead to a number of negative outcomes for investors.
The downside: This option can sacrifice the opportunity for higher dividends provided by a high-yield strategy mentioned above. Also, a focus on historical dividend growers might ignore fundamentally attractive companies that are: newer, have smaller capitalization, or have just started transforming their strategy into a dividend-paying model.
With these two dividend strategies, investors are forced to make a mutually exclusive decision to either chase high yields or purchase dividend growth stocks. But, ultimately, neither strategy provides the full breadth of benefits of dividend investing.
Instead of forcing investors to choose one strategy or the other, RBC Quant Dividend Leaders ETFs offer the best of both worlds: the growth potential of a dividend-growers portfolio, combined with the attractive income of a high-dividend portfolio.
In order to achieve this objective, RBC Quant Dividend Leaders ETFs incorporate a number of strategic choices:
Today’s investors want both an attractive monthly income stream that has the ability to grow over time, and long-term capital growth from a diversified portfolio of good quality, stable dividend-paying companies. RBC ETFs offer a strategic, well-thought-out solution that uses forward-looking factors designed to provide these characteristics.
RBC Global Asset Management Inc. is Canada's largest fund company by assets under management (IFIC, as of August 31, 2017). Commissions, management fees and expenses all may be associated with investments in exchange-traded funds (ETFs). Please read the prospectus or Fund Facts document before investing. ETFs are not guaranteed, their values change frequently and past performance may not be repeated. ETF units are bought and sold at market price on a stock exchange and brokerage commissions will reduce returns. RBC ETFs do not seek to return any predetermined amount at maturity. Index returns do not represent RBC ETF returns. RBC ETFs are managed by RBC Global Asset Management Inc., an indirect wholly-owned subsidiary of Royal Bank of Canada. The indicated rates of return are the historical total returns for the periods including changes in unit value and reinvestment of all distributions and do not take into account sales, redemption, commission charges or income taxes payable by any unitholder that would have reduced returns.
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This information has been provided by RBC Global Asset Management Inc. (RBC GAM) and is for informational purposes only. It is not intended to provide legal, accounting, tax, investment, financial or other advice and such information should not be relied upon for providing such advice. The information contained herein is from sources believed to be reliable, but accuracy cannot be guaranteed. Commissions, management fees and expenses all may be associated with investments in exchange-traded funds (ETF). Please read the prospectus or Fund Facts document before investing. ETFs are not guaranteed, their values change frequently and past performance may not be repeated. ETF units are bought and sold at market price on a stock exchange and brokerage commissions will reduce returns. RBC ETFs do not seek to return any predetermined amount at maturity. Index returns do not represent RBC ETF returns. RBC ETFs are managed by RBC Global Asset Management Inc., an indirect wholly-owned subsidiary of Royal Bank of Canada.
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