TBG: Dividend Strategy Mindful Of FCF, Mostly Delivers, Worth Shortlisting

2025-02-20 02:03:04 ET

Summary

• TBG has an active strategy with a focus on dividend growth stocks with resilient balance sheets and robust FCF.
• The results it has delivered since inception in 2023 are impressive beyond doubt, as it has beaten a few heavyweight dividend growth ETFs easily.
• Its financials-heavy portfolio of 35 companies has impressive quality and value exposures. However, its growth characteristics, namely the 3-year FCF CAGR, look too weak to me.
• Owing to its high expense ratio of 59 bps, weak growth characteristics, and a comparatively short trading history of 14 full calendar months, I believe the Hold rating is to be chosen.

The TBG Dividend Focus ETF ( TBG ) is a dividend growth-focused vehicle with $113.2 million in assets under management. Incepted in November 2023, TBG has already delivered rather impressive results, as it has easily beaten a few heavyweight peers from the dividend growth ETF cohort, plus it had even outperformed the iShares Core S&P 500 ETF ( IVV ) over December 2023-November 2024. And after reviewing its concentrated portfolio with due meticulousness, I should conclude that this basket, which is dominated by the S&P 500 constituents, has sound fundamentals, mostly when it comes to value (a weighted-average forward dividend yield of almost 4% is a nice indication to begin with) and quality exposures....

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