Given this environment, Jaron Liu, Director, ETF Strategy, CI Global Asset Management, believes there is a greater emphasis on companies that have solid fundamentals, sustainable earnings and enduring business models. And for those investors looking for diversified large-cap exposure with genuine growth potential, Liu said the CI WisdomTree suite of quality dividend growth index ETFs offer a compelling solution.
The CI WisdomTree U.S. Quality Dividend Growth Index ETF (DGR.B), CI WisdomTree International Quality Dividend Growth Index ETF (IQD.B), and the CI WisdomTree Canada Quality Dividend Growth Index ETF (DGRC) are multi-factor strategies that allow investors to focus on quality, a factor that has traditionally done well during periods of economic contraction.
Liu explained: “Quality companies tend to be characterized as having stronger balance sheets, more stable profitability and lower leverage. That makes them more resilient during periods of higher market volatility.”
Weeding out genuine quality
The CI WisdomTree suite has a unique methodology that considers only dividend-paying companies that have earnings yields greater than their dividend yield, ensuring they can afford to pay out dividends from what they earn through business operations. The funds then apply a quality and forward-looking growth screen featuring metrics such as return on equity, return on assets, and a three-to-five-year earnings growth estimate. This helps screen out highly leveraged companies at risk in the current economic climate.
Liu said: “This is important because we want to ensure that not only are these companies able to grow their earnings, but that the dividends they pay out are actually sustainable over the long term.”
