If last year was the year of tech and innovation stocks, this is the year of recovery and income stocks. With the economy continuing to show signs of growth and support from the Fed, dividends paid out from stocks are set to soar next quarter.
Even with the new Delta Variant throwing a wrench into a full recovery, the economy continues to show signs of strength. The economy likely grew at an 8.5% annualized rate last quarter, according to a Reuters survey of economists. This would be the second-fastest GDP growth pace since 1983.
Aiding the strong growth is the Fed’s commitment to keeping rates low during a time of uneven employment and rising inflation. Currently, the job market still needs to grow at a faster pace and if the Fed increased rates to tamp down inflation, it would hurt the recovering job market. The Fed also approved payout hikes for the banking sector. Major banks like JP Morgan, Chase and Bank of America raised their dividends for the third quarter following the Fed Stress test.
Two excellent Dividend ETF’s to look at are the Vanguard High Dividend Yield ETF (VYM) and Schwab U.S. Dividend Equity ETF (SCHD).
Vanguard High Dividend Yield ETF is a higher performing, high yield ETF whose holdings are comprised of the highest quality stocks on the market. We breakdown VYM below:
Schwab U.S. Dividend Equity ETF is another excellent performer, showing consistent growth but with a different set of holdings than VYM. Our breakdown is below:
Summary:
Next quarter looks like an excellent opportunity to get in on high yield dividends, but it won’t stop there. With continued growth, new infrastructure bills, and Federal support, dividend paying stocks will most likely continue to grow for the foreseeable future. VYM and SCHD could be two great Dividend ETF’s set to return growing yields for a long time.
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