RDVY targets companies that have recently started growing their dividends after a period of stability, catching them early in what could be a multi-year dividend growth cycle. This contrasts with traditional dividend aristocrat funds that focus on companies with decades-long track records.
How It Works
The fund screens for companies with at least 5 years of stable dividends that have increased their payout in the past year, then weights by a combination of dividend yield and recent dividend growth rate. It rebalances quarterly to capture new dividend growers while selling those whose growth has stalled. This momentum-based approach aims to front-run inclusion in more established dividend growth indices.
Key Features
- Captures dividend growers 20+ years before they'd qualify for aristocrat indices
- Higher yield than growth-focused dividend ETFs while maintaining growth potential
- Quarterly rebalancing keeps the portfolio fresh with emerging dividend stories
Risks
- Companies early in dividend growth cycles may cut during downturns — less proven than aristocrats
- Concentrated in financials and industrials which amplifies sector-specific risks
- High turnover from quarterly rebalancing creates tax drag in taxable accounts
Who Should Own This
Best for income investors who want more growth potential than high-yield traps but aren't willing to wait decades for aristocrat-level safety. Works well as a satellite holding alongside core dividend positions, particularly for those in tax-deferred accounts who can avoid the rebalancing tax hit.