• Recovery plays, such as dividend stocks, have gained momentum as developed market economies continue loosening social restrictions .
• Demand for strategies that incorporate ESG into the portfolio management process has been increasing, especially with European ETF investors.
• With the launch of Dividend Aristocrats ESG UCITS ETFs, European investors now have the ability to play a sustainable (economic) recovery in dividend stocks with a sustainable philosophy for the portfolio.
Current Environment May Favour Dividends and ESG
Current economic sentiment provides a supportive case for dividend stocks based on recent earnings guidance, analyst projections and general optimism toward a continued economic recovery. This environment could present an opportunity for global equity investors using UCITS ETFs to return to dividend strategies, following momentum seen in other recovery plays. Global equity investors heard a number of positive themes this earnings season, which help shaped the future estimates on forward dividends.
The foundational philosophy of the Dividend Aristocrats strategies has long been an explicit focus on companies with a long-term track record of stable dividend growth. This is considered a well-established approach to investing, through targeting quality income from dividend stocks. With the addition of new ESG screens to the selection process, the S&P Dividend Aristocrats® ESG indices bring focus to dividend payers with sustainable/ethical business practices. This combination of sustainable investing with stable dividends comes at a good time for investors seeking to increase their dividend exposure in the recovery, while also looking to increase ESG considerations in the portfolio.
ESG Doesn’t Mean Sacrificing Yield
Investors often fear that incorporating ESG considerations in the portfolio selection process inhibits their ability to deliver return. With respect to the dividend income generated from incorporating ESG into the Dividend Aristocrats methodology, this does not appear to be the case when we look at back-tested data for the past decade. Despite some more recent dispersion in yield discount in the Global (Figure 3) and Euro (Figure 2) strategies, the long-term trend still favours parity between a non-ESG and ESG Dividend Aristocrats strategy. In the US (Figure 1) we have to go all the way back to 2012 to see any material separation. At the end 2016, the ESG index actually experience a period of yield premium compared to the non-ESG version.
Investors should be wary to pull out too soon and not benefit from the full recovery of the global economy, as social restrictions continue to loosen. In one simple trade, ESG-conscious investors optimistic about the economic momentum behind dividend stocks, and who are seeking to add yield factor exposure to the portfolio, can now trade the SPDR® S&P® Dividend Aristocrats ESG UCITS ETFs in three regional exposures: US, eurozone and global.
Figure 1: US Dividend Aristocrats Yield History (Last 10 Years)
Figure 2: Euro Dividend Aristocrats Yield History (Last 10 Years)
Figure 3: Global Dividend Aristocrats Yield History (Last 10 Years)
Figure 4: Dividend Aristocrats ESG Product Overview
Figure 5: European-Domiciled ETP Asset Flows (Top/Bottom 5, $mn)
Figure 6: European-Domiciled ETP Asset Category Flows ($mn)
Information Classification: General Access.
For professional clients use only. For qualified investors according to Article 10(3) and (3ter) of the Swiss Collective Investment Schemes Act (“CISA”) and its implementing ordinance, at the exclusion of qualified investors with an opting-out pursuant to Art. 5(1) of the Swiss Federal Law on Financial Services ("FinSA") and without any portfolio management or advisory relationship with a financial intermediary pursuant to Article 10(3ter) CISA (“Excluded Qualified Investors”) only.
For Investors in Austria: The offering of SPDR ETFs by the Company has been notified to the Financial Markets Authority (FMA) in accordance with section 139 of the Austrian Investment Funds Act. Prospective investors may obtain the current sales Prospectus, the articles of incorporation, the KIID as well as the latest annual and semi-annual report free of charge from State Street Global Advisors GmbH, Brienner Strasse 59, D-80333 Munich. T: +49 (0)89-55878-400. F+49 (0)89-55878-440.
For Investors in Finland: The offering of funds by the Companies has been notified to the Financial Supervision Authority in accordance with Section 127 of the Act on Common Funds (29.1.1999/48) and by virtue of confirmation from the Financial Supervision Authority the Companies may publicly distribute their Shares in Finland. Certain information and documents that the Companies must publish in Ireland pursuant to applicable Irish law are translated into Finnish and are available for Finnish investors by contacting State Street Custodial Services (Ireland) Limited, 78 Sir John Rogerson’s Quay, Dublin 2, Ireland.
For Investors in France: This document does not constitute an offer or request to purchase shares in the Company. Any subscription for shares shall be made in accordance with the terms and conditions specified in the complete Prospectus, the KIID, the addenda as well as the Company Supplements. These documents are available from the Company centralizing correspondent: State Street Banque S.A., Coeur Défense - Tour A - La Défense 4 33e étage 100, Esplanade du Général de Gaulle 92 932 Paris La Défense cedex France or on the French part of the site ssga.com/etfs. The Company is an undertaking for collective investment in transferable securities (UCITS) governed by Irish law and accredited by the Central Bank of Ireland as a UCITS in accordance with European Regulations. European Directive no. 2014/91/EU dated 23 July 2014 on UCITS, as amended, established common rules pursuant to the cross-border marketing of UCITS with which they duly comply. This common base does not exclude differentiated implementation. This is why a European UCITS can be sold in France even though its activity does not comply with rules identical to those governing the approval of this type of product in France.The offering of these compartments has been notified to the Autorité des Marchés Financiers (AMF) in accordance with article L214-2-2 of the French Monetary and Financial Code.
For Investors in Germany: The offering of SPDR ETFs by the Companies has been notified to the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) in accordance with section 312 of the German Investment Act. Prospective investors may obtain the current sales Prospectuses, the articles of incorporation, the KIIDs as well as the latest annual and semiannual report free of charge from State Street Global Advisors GmbH, Brienner Strasse 59, D-80333 Munich. T: +49 (0)89-55878-400.
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For Investors in Switzerland: This document is directed at qualified investors only, as defined Article 10(3) and (3ter) of the Swiss Collective Investment Schemes Act (“CISA”) and its implementing ordinance, at the exclusion of qualified investors with an opting-out pursuant to Art. 5(1) of the Swiss Federal Law on Financial Services ("FinSA") and without any portfolio management or advisory relationship with a financial intermediary pursuant to Article 10(3ter) CISA (“Excluded Qualified Investors”). Certain of the funds may not be registered for public sale with the Swiss Financial Market Supervisory Authority (FINMA) which acts as supervisory authority in investment fund matters. Accordingly, the shares of those funds may only be offered to the aforementioned qualified investors and not be offered to any other investor in or from Switzerland. Before investing please read the prospectus and the KIID. In relation to those funds which are registered with FINMA or have appointed a Swiss Representative and Paying Agent, prospective investors may obtain the current sales prospectus, the articles of incorporation, the KIIDs as well as the latest annual and semi-annual reports free of charge from the Swiss Representative and Paying Agent, State Street Bank International GmbH, Munich, Zurich Branch, Beethovenstrasse 19, 8027 Zurich, or at www.spdrs.com, as well as from the main distributor in Switzerland, State Street Global Advisors AG (“SSGA AG”), Beethovenstrasse 19, 8027 Zurich. For information and documentation regarding all other funds, please visit ssga.com or contact SSGA AG.
United Kingdom: The Funds have been registered for distribution in the UK pursuant to the UK’s temporary permissions regime under regulation 62 of the Collective Investment Schemes (Amendment etc.) (EU Exit) Regulations 2019. The Funds are directed at 'professional clients' in the UK (as defined in rules made under the Financial Services and Markets Act 2000) who are deemed both knowledgeable and experienced in matters relating to investments. The products and services to which this communication relates are only available to such persons and persons of any other description should not rely on this communication. Many of the protections provided by the UK regulatory system do not apply to the operation of the Funds, and compensation will not be available under the UK Financial Services Compensation Scheme.
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