There are two reasons to hold stocks: growth and yield, it’s that simple. The ASX provides yield in abundance compared to its global peers, plus it has the added attraction of franking credits for many local investors. As investors crowd around AI and other high-growth tech names, one part of the market that has quietly delivered steady, inflation-beating returns is dividend growth. In a market where valuations in certain sectors are stretched and leadership is unusually narrow, dividend-growth ETFs offer something different—companies with durable earnings, reliable cash flows, and long histories of rewarding shareholders. These businesses don’t need the next breakthrough to justify their valuations; they simply need to keep doing what they do best: generate steady & growing earnings and pass them through to investors via a growing stream of dividends.
Dividend-growth strategies have also tended to outperform during late-cycle and volatile periods, the kind of environment that often emerges after major thematic rallies, in today’s case AI.
- The ETF holds 79 stocks, with its 5 largest positions currently CBA, NAB, Westpac, ANZ, and Telstra – clearly very bank heavy, with the “Big Four” making up ~28% of the ETF, and we don’t forecast a lot of growth in dividends in the next 12 months or so.
- It has a large $5.8bn market cap, while its fees are reasonable at 0.25%.
We expect ongoing volatility as we head into Christmas, making this ETF an interesting one to consider, albeit very vanilla. It pays a quarterly dividend and is forecast to yield ~4% in the next 12-months – not as exciting as the name would imply!
- We don’t mind the VHY as the “AI Trade” valuation gets called into question, but we think we can do better investing for income directly.
