Dividend ETFs return to favour with record inflows


Dividend ETFs have enjoyed record inflows in the third quarter attracting $9.3bn making 2016 the most popular year for the category so far.

It reverses record outflows in Q2 and Q3 of 2015, when the commodities slump hit many strategies due to their high exposure to the oil and materials sectors, according to Markit ETP analysis of 268 globally listed funds.

For example, the Vanguard Dividend Appreciation ETF was trailing the SPRD S&P 500 ETF by over 4.5 per cent at one point in November last year. It ended the year 3 per cent down on the index on a total return basis.

Net flows for this year currently stand at $21.6bn, nearly $3bn more than the previous yearly record in 2013.

Markit attributes the rebound to commodities performance since February and the lack of rate hike from the US Federal Reserve.

Dividend ETFs currently account for almost a quarter of equity ETF inflows in the year to date, more than double the level over the previous five years, when the average proportion has been 10 per cent.

Markit noted that investors have preferred products that invest in high yield stocks over products that grow payments over time.

The Vanguard Dividend Appreciation ETF remains the most popular dividend ETF, gathering $3.1bn in inflows, but high dividend yield offerings from Powershares and iShares have rivalled their large peer.