For the first time in recent memory, every dividend ETF in the ETF Action database posted a positive return in November. What's more, nearly 1/3 of them generated a gain of at least 10%. It's one of the best months for dividend ETFs in a long time and put the group well ahead of the S&P 500's 5.6% gain and the Russell 2000's 2.2% return. Even as U.S. equities began turning higher in late September, more conservative strategies, including dividend growth and high yield, have remained as leaders.
The other major trend we saw in November was one we haven't seen in a while - leadership from international stocks. This group has offered investors good value for some time, especially emerging markets, but the bear market of 2022 has mostly kept investors focused on the relative safety of the U.S. markets. The rally in the dollar, which gained steam very consistently from the start of the year through September, further enhanced gains in domestic stocks.
That trend has since reversed. The dollar is headed lower again and that's been a tailwind for foreign stocks. The latest leg of the currently hasn't been led by growth and tech as it often has in the past. This run is being powered by low volatility, dividends and value stocks. Growth tends to outperform when a positive economic cycle is already established, but when a new cycle is trying to establish itself, value often takes the lead. That's what happened in November as investors eyed a slowdown in rate hikes from the Fed and the idea that a recession might not come until well into the 2nd half of 2023.
Whether the dividend stock leadership theme carries forward into 2023 remains to be seen, but it was undoubtedly the sector of choice for investors in November.
Here's the list of the best performing dividend ETFs for November 2022.
Every one of the top performing dividend ETFs last month had at least some international flavor, whether it focused on the broader global equity universe or stuck strictly with international or emerging markets stocks. The winner was the KraneShares S&P Pan Asia Dividend Aristocrats Index ETF (KDIV). This tiny $2.5 million fund targets companies from China, Japan, Australia, and other Asian countries that have raised their dividends for at least 7 consecutive years and weights them according to their dividend yield.
The 2nd place finisher, the SmartETFs Asia Pacific Dividend Builder ETF (ADIV), takes an approach that focuses more on fundamentals. It focuses on companies with balance sheet health and high quality dividend growth. It concentrates its portfolio in roughly 35 equally-weighted positions.
Dividend ETFs focused exclusively on emerging markets have offered enticing yields of 8% or more for months now, but the volatility, China drag and generally poor performance have made them untenable for many investors. Those deciding to ride out 2022's challenging conditions were finally rewarded with big returns in November. Among the best performers - the ProShares MSCI Emerging Markets Dividend Growers ETF (EMDV), the WisdomTree Emerging Markets Quality Dividend Growth ETF (DGRE), the AAM S&P Emerging Markets High Dividend Value ETF (EEMD) and the iShares Asia/Pacific Dividend ETF (DVYA) all managed gains of more than 15%. Interestingly, all of them utilized a different dividend strategy - dividend growth, dividend quality, high yield and pure beta - to generate their returns, indicating that favorable conditions existed for emerging markets broadly last month.
One ETF that I've owned in the past - the WisdomTree Emerging Markets High Dividend ETF (DEM) - also made the list. The fund's 9% yield was always one of the bigger draws, but its forward P/E ratio of just 6-7 and the fact that the portfolio is trading for less than book value demonstrates its clear value. I'm happy to see it finally having a moment.
More international flair in the rest of the top 30 (in fact, you'd have to look all the way down into the 50s to find a dividend ETF that invests solely in U.S. stocks). The one in this group that stands out to me is the Pacer Global Cash Cows Dividend ETF (GCOW). This ETF has made several appearances in the monthly top performer lists and has been one of the biggest success stories in what's been a terrific year for Pacer. The fund's focus on high free cash flow yielders, the same one that the Pacer Cash Cows 100 ETF (COWZ) also uses, has been one of the year's best strategies.
The VictoryShares Emerging Markets High Dividend Volatility Weighted ETF (CEY) is also a standout to me. Low volatility strategies had a rough year in 2021, but have come back strongly this year. High yielders, in general, have outperformed dividend growth, but combining high yield with low volatility has helped offer investors the best of both worlds.