The Shocking Truth About Dividend-Growth ETFs: Why You Should Ditch Them for Individual Stocks
In the world of investing, ETFs have long been praised for their low management fees. However, when it comes to dividend-growth ETFs, they may not be the best choice for investors. In fact, two popular dividend-growth ETFs, iShares Core Dividend Growth ETF and Vanguard Dividend Appreciation ETF, have underperformed the market significantly.
When compared to the S&P 500, these ETFs have lagged behind, with returns of only 18% compared to the benchmark’s 29% over the past year. Despite this poor performance, the yields offered by these ETFs are also lackluster, with VIG at 1.8% and DGRO at 2.3%.
The irony is that dividend-growth ETFs should have an inherent advantage, given their focus on companies with increasing payouts. This rising dividend pattern, known as the “Dividend Magnet,” is a key driver of share price gains. Companies like UnitedHealth Group have demonstrated this pattern, with significant payout hikes leading to impressive stock price gains.
By analyzing the performance of individual stocks like Home Depot and Visa, investors can identify fast-growing payouts and capitalize on the power of the Dividend Magnet. Home Depot, for example, is poised for growth as the home renovation boom is expected to surge in the coming years. Similarly, Visa has benefited from the decline of physical cash transactions, driving more business to its payment network.
In conclusion, while dividend-growth ETFs may seem like a safe bet, the potential gains from carefully selected individual stocks far outweigh the benefits of these ETFs. By understanding the Dividend Magnet pattern and identifying companies with strong dividend growth potential, investors can unlock significant returns and secure their financial future. The Ultimate Guide to Visa’s Dominance in the US Credit Card Market
Visa, the powerhouse that controls 52% of the US credit card market, continues to rake in massive profits. In fiscal 2023, Visa reported a staggering $33 billion in revenue, a 43% increase from pre-pandemic levels in 2019. With US consumers still standing strong amidst decreasing inflation rates, Visa’s revenue growth is expected to persist.
What sets Visa apart is its non-bank status, solely focused on payment processing. This unique positioning has allowed Visa to maintain a flawless balance sheet, with $20.6 billion in long-term debt offset by $17.7 billion in cash and short-term investments. It’s no surprise that Visa is a cash cow, with free cash flow per share soaring by 264% over the last decade.
Millions of transactions processed by Visa translate into a lucrative cash-flow stream, driving a 420% increase in dividends. Despite its current yield of 0.8%, dividend growth is the real star performer here.
Visa’s stock has a history of bouncing back and reaching new heights after any dips in its dividend payouts. The current scenario presents an excellent buying opportunity for investors.
In conclusion, Visa’s stronghold in the credit card market, robust financials, and consistent dividend growth make it a compelling investment opportunity for income-focused investors. With Visa’s track record of success and resilience, investors can expect steady returns and long-term growth potential.