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Growth has been a factor that has earned attention in 2024 due to the success of high-profile megacap companies like the Magnificent 7 stocks in the first half of the year. One often overlooked indication of company strength is the ability to issue and sustain a dividend. Dividends are a signal of financial health and stability. Historically, dividends have been associated with value-oriented companies. However as growth companies mature and generate excess cash flows, these funds can be returned to shareholders through dividend payments.
Does the initiation of a dividend portend the end of a company’s growth cycle? Not necessarily. Chip maker Nvidia initiated its first dividend in November of 2012. Over that period Nvidia has seen company growth soar and its share value rise by more than 41,000%.
Recognizing this potential, VettaFi has launched a unique suite of indexes that focus on companies that have initiated or reinitialized dividend payments after at least three years without dividends. The VettaFi Dividend Initiators Index Suite offers a comprehensive approach to capturing both the potential dividend growth and the cash-flow stability associated with these companies, covering a range of market capitalization and geographic regions.
One of the most compelling aspects of the VettaFi Dividend Initiators Index Suite is its focus on companies starting their dividend-paying journey. These companies are typically not yet included in the most well-known dividend growth indexes tracked by ETFs. By the time a company meets the decade-plus stringent criteria to join these established indexes, much of the initial growth potential may have already been realized. The VettaFi indexes, however, capture these companies at the start of their dividend journey, allowing investors to benefit from their early-stage dividend growth or turnaround success.
Companies remain in the VettaFi index for three years, provided they continue to make regular dividend payments. This approach ensures that the index reflects companies committed to returning value to shareholders while offering exposure to those in the early stages of a sustainable dividend lifecycle.
Many other dividend indexes require a dividend distribution history of 20 to 30 years. This leaves out many higher-performing, new dividend-paying stocks such as:
The VettaFi Dividend Initiators Index Suite is available in three versions:
VettaFi US Large Cap Dividend Initiators Index
Designed to track large-cap companies in the United States.
VettaFi Developed ex US Dividend Initiators Index
Designed for exposure beyond the United States, the VettaFi Developed ex US Dividend Initiators Index targets large and mid-cap companies in developed markets outside the U.S.
VettaFi Small Cap Dividend Initiators Index
Focused on U.S. small-cap companies, the VettaFi Small Cap Dividend Initiator Index offers exposure to companies often overlooked in traditional dividend strategies.
In 2024, the VettaFi US Large Cap Dividend Initiators Index demonstrated its effectiveness, posting a return of 17%, modestly outperforming the S&P 500. With a robust back-test history spanning over 20 years, the index has consistently delivered strong performance, underscoring the value of early-stage dividend initiators.
VettaFi Head of Research Todd Rosenbluth stated, "There's a new wave of growth companies paying dividends seldom found in traditional dividend indexes. Dividend payments are a sign of financial strength."
Despite this strong performance, there are currently no ETFs tracking the VettaFi Dividend Initiators Indexes, which presents a unique opportunity for investors. As more growth-oriented companies, like Alphabet, Meta Platforms, and Commerzbank AG begin paying dividends, the relevance of this index will only grow. Investors who recognize the potential of these dividend initiators may find themselves ahead of the curve in capturing the growth and stability these companies offer.
As the market evolves and more companies enter the dividend-paying arena, the importance of early identification through the VettaFi Dividend Initiators Index Suite is likely to become increasingly apparent.
Would you like to learn more about this or other index opportunities? Click here.
Growth has been a factor that has earned attention in 2024 due to the success of high-profile megacap companies like the Magnificent 7 stocks in the first half of the year. One often overlooked indication of company strength is the ability to issue and sustain a dividend. Dividends are a signal of financial health and stability. Historically, dividends have been associated with value-oriented companies. However as growth companies mature and generate excess cash flows, these funds can be returned to shareholders through dividend payments.
Does the initiation of a dividend portend the end of a company’s growth cycle? Not necessarily. Chip maker Nvidia initiated its first dividend in November of 2012. Over that period Nvidia has seen company growth soar and its share value rise by more than 41,000%.
Recognizing this potential, VettaFi has launched a unique suite of indexes that focus on companies that have initiated or reinitialized dividend payments after at least three years without dividends. The VettaFi Dividend Initiators Index Suite offers a comprehensive approach to capturing both the potential dividend growth and the cash-flow stability associated with these companies, covering a range of market capitalization and geographic regions.
One of the most compelling aspects of the VettaFi Dividend Initiators Index Suite is its focus on companies starting their dividend-paying journey. These companies are typically not yet included in the most well-known dividend growth indexes tracked by ETFs. By the time a company meets the decade-plus stringent criteria to join these established indexes, much of the initial growth potential may have already been realized. The VettaFi indexes, however, capture these companies at the start of their dividend journey, allowing investors to benefit from their early-stage dividend growth or turnaround success.
Companies remain in the VettaFi index for three years, provided they continue to make regular dividend payments. This approach ensures that the index reflects companies committed to returning value to shareholders while offering exposure to those in the early stages of a sustainable dividend lifecycle.
Many other dividend indexes require a dividend distribution history of 20 to 30 years. This leaves out many higher-performing, new dividend-paying stocks such as:
The VettaFi Dividend Initiators Index Suite is available in three versions:
VettaFi US Large Cap Dividend Initiators Index
Designed to track large-cap companies in the United States.
VettaFi Developed ex US Dividend Initiators Index
Designed for exposure beyond the United States, the VettaFi Developed ex US Dividend Initiators Index targets large and mid-cap companies in developed markets outside the U.S.
VettaFi Small Cap Dividend Initiators Index
Focused on U.S. small-cap companies, the VettaFi Small Cap Dividend Initiator Index offers exposure to companies often overlooked in traditional dividend strategies.
In 2024, the VettaFi US Large Cap Dividend Initiators Index demonstrated its effectiveness, posting a return of 17%, modestly outperforming the S&P 500. With a robust back-test history spanning over 20 years, the index has consistently delivered strong performance, underscoring the value of early-stage dividend initiators.
VettaFi Head of Research Todd Rosenbluth stated, "There's a new wave of growth companies paying dividends seldom found in traditional dividend indexes. Dividend payments are a sign of financial strength."
Despite this strong performance, there are currently no ETFs tracking the VettaFi Dividend Initiators Indexes, which presents a unique opportunity for investors. As more growth-oriented companies, like Alphabet, Meta Platforms, and Commerzbank AG begin paying dividends, the relevance of this index will only grow. Investors who recognize the potential of these dividend initiators may find themselves ahead of the curve in capturing the growth and stability these companies offer.
As the market evolves and more companies enter the dividend-paying arena, the importance of early identification through the VettaFi Dividend Initiators Index Suite is likely to become increasingly apparent.
Would you like to learn more about this or other index opportunities? Click here.
