The Secret to the Capital Group Dividend Value ETF's Success
The Capital Group Dividend Value ETF, ticker CGDV, has emerged as the top-performing dividend fund this year, surpassing its peers, according to Morningstar. Bryan Armour, Morningstar's director of passive strategies research for North America, attributes its success to a unique "secret sauce" strategy. With a 30-day SEC yield of 1.76% and a total return of 16.37% year-to-date, this fund has outperformed expectations.
A Focus on High-Quality Dividend-Paying Companies
The core premise of the Capital Group Dividend Value ETF's strategy revolves around targeting high-quality companies that have consistently paid dividends for over a decade. Armour explains that this long-term approach has proven to be highly effective. The fund seeks out companies with dividends up to 30% higher than the S&P 500, which currently yields 1.52%. However, the fund also strategically invests up to 10% in non-dividend paying companies, which has contributed to its success this year.
Identifying Turnaround Candidates
The fund's strategy also involves allocating investments towards companies with strong balance sheets, profitability, and modest leverage that show potential for a rebound. Armour highlights this as the secret sauce behind the fund's performance. For example, the fund holds modest stakes in companies like Meta and Royal Caribbean, which have seen significant growth in their stock prices. Meta's shares have surged by 138% year-to-date, while Royal Caribbean's stock has doubled.
A Diversified and Well-Managed Fund
CGDV, the Capital Group's largest exchange-traded fund, was among the first six ETFs launched by the firm in February 2022. With $2.8 billion in assets under management, it primarily focuses on U.S. large-cap, investment-grade rated companies. Jacob Gerber, investment director at Capital Group, emphasizes that investors appreciate the fund's non-traditional value strategy, which prioritizes above-average income and long-term capital appreciation through investments in undervalued companies.
A Team Approach to Portfolio Management
The fund's success is also attributed to a team of five managers who individually select their highest conviction picks, which are then combined into a single portfolio. This collaborative approach allows for a diverse range of investment strategies, resulting in a multifaceted approach that maximizes returns. Armour notes that this process yields different outcomes for various reasons, contributing to the fund's overall performance.
Strong Sector Positions and Performance
CGDV's largest sector position is in information technology, accounting for 20.4% of its net assets, followed by industrials at 16.9%. Over the past 12 months, the fund's stock selection within the industrials sector has significantly contributed to its absolute and relative results. Gerber specifically highlights the positive impact of investments in industrial conglomerates and building products.
In 2023, CGDV's net asset value has increased by 16.39%, as determined by Morningstar. This exceptional performance further solidifies the fund's position as a top-performing dividend fund.
In conclusion, the Capital Group Dividend Value ETF's success can be attributed to its strategic focus on high-quality dividend-paying companies, its ability to identify turnaround candidates, and its team-based approach to portfolio management. With a strong sector presence in information technology and industrials, this fund has demonstrated its ability to generate impressive returns. As investors seek a non-traditional value strategy that combines income and capital appreciation, CGDV continues to deliver exceptional results.
Implications for New Businesses Amidst the Success of the Capital Group Dividend Value ETF
The success of the Capital Group Dividend Value ETF (CGDV) provides valuable insights for new businesses. Its strategic focus on high-quality dividend-paying companies and its ability to identify potential rebound candidates could serve as a blueprint for new businesses seeking to maximize their growth and profitability.
Adopting a Long-Term Approach
New businesses could benefit from adopting a similar long-term approach, focusing on building a strong foundation that will yield consistent returns over time. This could involve prioritizing high-quality offerings and maintaining a strong balance sheet, which are key factors in CGDV's success.
Conclusion
In conclusion, the success of the Capital Group Dividend Value ETF offers a "hot take" on how new businesses could strategize for success. By focusing on high-quality offerings, identifying potential growth opportunities, and adopting a long-term approach, new businesses could position themselves for sustained growth and profitability. The success of CGDV serves as a testament to the effectiveness of these strategies, providing a roadmap for new businesses navigating the competitive business landscape.
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