eToro Dividend Growth

Key Features of the DividendGrowth Smart Portfolio

1. Focus on “Dividend Aristocrats”

The foundation of DividendGrowth lies in identifying businesses that have a dependable track record of increasing their dividends year after year—at least 20 consecutive years, in fact. This reliable track record is often interpreted as a signal of strong corporate health, stable earnings, and prudent management. Consistent dividend increases also demonstrate a commitment to sharing profits with shareholders.

2. Portfolio Construction and Selection Process

eToro uses a rigorous screening process to build the DividendGrowth portfolio:

1. Initial Universe Scan
   From all the stocks available on eToro, the platform filters out any that have not paid consecutively increasing dividends per year for at least 20 years.

2. Financial and Analyst Screening
   Each qualifying stock is evaluated using metrics such as market capitalization, liquidity, financial ratios, and analyst consensus ratings. This ensures that only companies with strong fundamentals make it to the ranking stage.

3. Ranking and Weighting
   The top-ranked stocks from this screening process are included in the portfolio. Their inclusion weights are determined, in part, by limits on minimum and maximum allocations to avoid excessive concentration in any one security.

3. Sector and Geographical Diversification

To maintain a balanced portfolio, DividendGrowth invests in a range of sectors such as utilities, oil & gas, pharmaceuticals, and telecommunications. According to the latest breakdown:

• Major Sectors: Electronic Technology, Consumer Non-Durables, Utilities, Energy Minerals, Health Technology, Retail Trade, and more.

• Geographical Allocation: Predominantly U.S.-based companies (over 80%), with additional exposure to Canada, Ireland, the UK, and France.

This multi-sector, multi-region strategy helps reduce the risk of relying too heavily on a single sector or market.

4. Minimum Investment Requirement

One of the advantages of eToro’s Smart Portfolios is the relatively low barrier to entry. For DividendGrowth, the minimum investment is $500. This makes it accessible to a wide range of investors who are interested in diversifying their portfolios with steady dividend payers but may not have very large sums to invest.

5. Yearly Rebalancing

The portfolio is rebalanced once a year or at eToro’s discretion, depending on market conditions. This helps ensure that the holdings continue to align with the portfolio’s objective: to capture well-established companies that consistently increase their dividends while managing risk and sector allocations.

Performance Snapshot

As of recent figures, the DividendGrowth Smart Portfolio has demonstrated solid returns:

• November: +1.7%

• Year to Date (YTD): +14.48%

• 1 Year: +20.18%

• 5 Years: +40.33%

• Annualized Return: +8.3%

The portfolio has had some drawdowns over various periods, with the most significant being around -12.6% starting in April 2022 and lasting until November 2022. Nonetheless, the approach of targeting companies with robust dividend track records often helps to moderate volatility in turbulent market conditions.

Dividend Yield and Upcoming Payments

One of the core appeals of this Smart Portfolio is its current dividend yield of approximately 2.75%. The portfolio holds 40 instruments, all of which pay dividends. Some highlights include:

• Highest Dividend: Realty Income Corp (O) at around 5.95% yield.

• Upcoming Dividend Payments: Several portfolio companies have scheduled dividends in the next 30 to 60 days. For example, Eversource Energy (ES) has a pay date on December 31, while Imperial Oil (IMO) pays on January 1, and Nike (NKE) on January 2.

Thanks to these ongoing payouts, investors can anticipate periodic income additions to their accounts, which can be reinvested or withdrawn depending on personal investment goals.

Risk Management and Diversification

To maintain a balanced approach:

1. Sector Limits ensure that the portfolio does not become overly reliant on one industry.

2. Geographical Diversification reduces country-specific risks (while still having a large portion of the portfolio in the United States).

3. Periodic Rebalancing keeps the weight of each asset aligned with the intended risk and performance characteristics.

Further risk metrics such as a Risk Score of 4, a Beta of 0.71, and a Sharpe Ratio of 0.37 (all-time) offer insight into the portfolio’s volatility and risk-adjusted returns. These figures suggest moderate risk relative to broad market movements.

Who Might Consider DividendGrowth?

1. Income-Focused Investors
   If you are looking for periodic income, a portfolio composed of long-standing dividend payers can be attractive, especially in low-interest-rate environments.

2. Long-Term Investors
   Those who aim to grow their investments through both capital appreciation and reinvested dividends over time may benefit from this strategy.

3. Diversification Seekers
   DividendGrowth provides diversified exposure across a range of sectors and countries, which can be an effective complement to other holdings in an investor’s portfolio.