We recently compiled a list of the 10 Best Performing Dividend ETFs In 2024. In this article, we are going to take a look at where T. Rowe Price Dividend Growth ETF (NYSE:TDVG) stands against the other dividend ETFs.
By the end of 2023, the global ETF market had reached $11.1 trillion in assets under management (AUM) and expanded to include 9,149 funds. This growth was driven by several milestones and the diversification of ETF offerings, which now cover equity, fixed income, active management, and alternative strategies. Despite unpredictable factors such as the rise of AI or policy changes, ETFs continue to be a vital investment tool. According to State Street Global Advisors, although only 45% of individual investors in the US use ETFs, nearly 70% of financial advisors and 67% of institutional investors recommend or use them frequently. However, ETFs still make up only 11.25% of the total global investable assets, suggesting there is significant potential for further growth.
Interest in ETFs is rising, particularly among retail investors, with 63% of US investors planning to purchase ETFs in 2024, a sharp increase from 37% during 2022. Active ETFs are experiencing considerable growth, with global inflows hitting a record $166 billion in 2023 and continuing to rise in 2024. Much of this growth is driven by fixed income and alternative investments, while AI-related ETFs, especially in robotics and semiconductors, are attracting large amounts of investment. These trends reflect the growing demand for ETFs as investors seek more flexible and efficient ways to respond to market changes.
A Reuters report from October 2024 highlighted that US ETFs focused on dividend-paying stocks have experienced a significant increase in inflows since the Federal Reserve began its rate-cutting cycle the prior month. In September, 135 US dividend ETFs tracked by Morningstar saw $3.05 billion in inflows, far higher than the average $424 million per month in the first eight months of 2024. However, this trend may slow as US Treasury yields have risen recently, with 10-year Treasury yields hitting a two-month high following strong employment data that suggests the economy is resilient and may not need further large rate cuts.
Dividend ETFs tend to offer stable payouts and potential for growth, addressing challenges regarding unpredictable yields and limited principal growth. However, high-dividend ETFs vary in stability. Some high yields come from struggling companies with weak fundamentals. Riskier ETFs focus on stocks with declining conditions, leading to volatility and potential dividend cuts. Hence, investors should prefer dividend ETFs that manage exposure to unstable companies.
Our Methodology
We curated our list of the best dividend ETFs by choosing consensus picks from multiple credible websites. We have mentioned the year-to-date (YTD) share price performance of each ETF as of December 30, 2024, ranking the list in ascending order of the share price performance. We have also discussed the top holdings of the ETFs to offer better insight to potential investors.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here)
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T. Rowe Price Dividend Growth ETF (NYSE:TDVG)
YTD Share Price Performance as of December 30: 13.55%
T. Rowe Price Dividend Growth ETF (NYSE:TDVG) allocates at least 80% of its assets to stocks with a history of paying or the potential to pay dividends, including futures with similar characteristics. The fund’s strategy views consistent dividend growth as a sign of financial stability and long-term growth. As of December 27, 2024, the ETF manages $754.9 million in net assets with a 0.50% expense ratio. It is one of the best performing ETFs for an income portfolio.
Microsoft Corporation (NASDAQ:MSFT) is the largest holding of T. Rowe Price Dividend Growth ETF (NYSE:TDVG). Microsoft Corporation (NASDAQ:MSFT) delivered strong Q3 results, with revenue climbing to $65.6 billion, a 16% increase led by a 20% growth in its Intelligent Cloud segment. Azure revenue surged by 34%, driven by AI services, although growth is anticipated to slow slightly in FY25 Q2 due to capacity limits and the absence of one-time Q1 revenue. The company’s AI division is set to achieve a $10 billion annual revenue run rate, making it the fastest-growing segment in Microsoft’s history.
As a leader in enterprise cloud, Microsoft Corporation (NASDAQ:MSFT) is driving digital transformation with cloud migration incentives, hybrid solutions like Azure Stack, and support for clients with Enterprise License Agreements. With free cash flow margins projected to hit 35–40% by 2028, Microsoft Corporation (NASDAQ:MSFT)’s strong growth in AI and cloud solidifies its role as a top enterprise investment, despite its premium valuation.
On December 4, Microsoft Corporation (NASDAQ:MSFT) declared a quarterly dividend of $0.83 per share. The dividend is to be distributed on March 13, 2025, to shareholders on record as of February 20.
Microsoft Corporation (NASDAQ:MSFT) remains one of the most popular stocks among Wall Street hedge funds. As of Q3 2024, 279 hedge funds were bullish on Microsoft, the same as the prior quarter.
Overall TDVG ranks 9th on our list of the best performing dividend ETFs of 2024. While we acknowledge the potential of TDVG as an investment, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than TDVG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.