Dividend growth funds launched in the last five years are reshaping how investors approach income by mixing innovation with steady yield strategies. This article explores seven standout funds disrupting the landscape, highlighting their unique approaches, performance, and future potential.

The Evolution of Dividend Growth Funds: A Story of Innovation and Resilience

As a 45-year-old finance professional with deep roots in investment management, I have witnessed the rise and fall of many income strategies over the decades. But nothing has matched the dynamism of the recent wave of dividend growth funds that popped up after 2018. These funds aren't just about collecting dividends—they seek companies demonstrating sustainable payout increases, bolstering income investors’ portfolios amid uncertain markets.

Why Dividend Growth Funds Matter More Than Ever

Income investors traditionally relied on high-yield or bond alternatives to generate cash flow. However, in today’s low interest rate and volatile economic environment, dividend growth funds provide a compelling balance of yield and capital appreciation. According to a 2023 report by Morningstar, dividend growth funds on average have outpaced traditional dividend funds by nearly 1.2% annually in total return over the past three years.

1. Vanguard Dividend Appreciation ETF (VIG)

VIG has established itself as a trailblazer since its inception in 2018, focusing on companies with a record of increasing dividends for at least 10 consecutive years. Its portfolio includes stalwarts like Microsoft and Johnson & Johnson, blending stability with growth potential. VIG’s five-year annualized return clocks in at approximately 11.4% (data from Vanguard, 2023), appealing to conservative income investors who seek steady appreciation.

Humor Break: Dividend Growth Funds Are Like Fine Wine — They Get Better With Time

Imagine your portfolio sipping a glass of 12-year-old Burgundy; dividend growth stocks age not just gracefully, but profitably. Sure, the market may throw tantrums like a toddler, but these funds are your financial babysitter ensuring those dividends keep rolling in.

2. JPMorgan Equity Premium Income ETF (JEPI)

Launched in 2020, JEPI introduced an innovative income method combining dividend growth equity with an options overlay strategy to generate premium income. This hybrid approach has drawn considerable investor attention, as it boosts yields while maintaining reasonable volatility. JEPI’s current distribution yield hovers around 7%, outperforming many peers in the dividend ETF universe.

Casual Chat: Why Younger Investors Should Tune Into Dividend Growth Funds

Hey, I’m just turning 23 and dipping my toes into income investing. Dividend growth funds sound old-fashioned, right? But guess what — they're increasingly cool. They offer a way to grow money steadily and keep those sweet dividends flowing, which is perfect for building wealth over years without the stress of trying to time the market.

3. Fidelity Dividend Growth Fund (FDGFX)

Though technically launched a bit earlier, its revamped strategy in 2019 counts as part of the new wave. Fidelity’s FDGFX embraces a mix of large-cap dividend growers primarily in technology and consumer sectors. Notably, the fund increased payouts by an average of 8% annually over the past four years, emphasizing companies like Apple and PepsiCo that combine dividend resilience with earnings momentum.

Case in point: During the 2020 pandemic crash, FDGFX’s holdings quickly recovered and resumed dividend hikes within a year, demonstrating remarkable resilience.

4. T. Rowe Price Dividend Growth Fund (PRDGX)

PRDGX, launched in late 2019, concentrates on U.S. firms with durable competitive advantages — so-called “economic moats.” Managed by seasoned analysts, it leans heavily on financials and healthcare sectors, yielding an average 3.2% dividend with consistent 5-7% annual growth. Its disciplined buy-and-hold approach steadily rewards investors without chasing fleeting market fads.

Statistics That Speak Volumes

According to Lipper data (2024), dividend growth funds introduced after 2018 have grown assets under management by over 60% compared to a mere 20% growth for traditional dividend funds in the same period. Investors evidently value the superior risk-adjusted return and growing income streams these newer funds provide.

5. Schwab U.S. Dividend Equity ETF (SCHD)

Re-launched with enhancements in 2019, SCHD remains a favorite due to its methodical selection criteria emphasizing quality and sustainable dividend payouts. Holding names like Home Depot and Coca-Cola, it exemplifies consistency, with a trailing 12-month yield near 3.5% coupled with solid dividend growth averaging 6% annually.

The Persuasive Case for Including Emerging Dividend Growth Funds in Your Portfolio

Let's cut to the chase: if you're seeking reliable income while still participating in market upside, these emerging dividend growth funds are worth your consideration. Their emphasis on sustained dividend increases shields you from companies with vulnerable payouts, and their diversified holdings mitigate sector-specific risks. Long-term, this means greater income stability and portfolio growth potential, an unbeatable combo in today’s investing world.

6. Invesco Dividend Achievers ETF (PDE)

Debuting in 2019, PDE spotlights companies from the Dividend Achievers Index with at least 10 consecutive years of dividend increases. The fund highlights tech-leaning industries and has an average annual yield of around 2.8%, but with dividend growth rates surpassing 7% annually — proving you don’t need enormous yields to build meaningful income.

7. BlackRock Equity Dividend Fund (MDDVX)

Just over three years old, MDDVX fuses dividend growth investing with deep fundamental analysis. It targets a blend of mid and large-cap stocks with above-average dividend growth potential. This fund’s portfolio boasts a balance of traditional dividend payers and innovative companies with evolving payout dynamics, yielding about 3.1% with 6.5% dividend growth in recent years.

Final Thoughts: Income Investing Meets Tomorrow

The last five years have ushered in a new breed of dividend growth funds characterized by innovation, tactical flexibility, and a long-term focus on increasing income. Whether you are a cautious retiree aiming for reliable cash flow or a younger investor looking for growth and income paired together, these funds provide scalable options across risk tolerances and market cycles. As you craft your income portfolio, keep an eye on these rising stars—you're likely to find an ideal match for your financial goals.

Sources:

- Vanguard, Fund Fact Sheets and Annual Reports, 2023

- Morningstar Dividend Growth Fund Performance Report, 2023

- Lipper Fund Data, 2024

- JPMorgan Asset Management, Product Overview, 2023