Income investors are off to a good start in 2022 with dividend ETF hitting all-time high

Published Wed, Jan 5 20221:01 PM ESTUpdated Wed, Jan 5 20222:48 PM EST

Dividend stocks reached new highs Wednesday and certain names are leading the way. Stocks with dividends typically do not offer dramatic price appreciation, but they give investors a way to get paid consistently. A dividend is a regular payout of a portion of a company's profits to its shareholders. The S & P Dividend exchange-traded fund (SDY) on Wednesday morning hit a new intraday all-time high back to its inception in 2005. "Capital return will be an important component of the '22 equity market narrative," Citi's Scott Chronert said in a December note. "A gradual return to pre-COVID ... dividend trajectories should unfold as the post-pandemic recovery continues." However, the dividend stocks' record comes as bond yields are rising higher too . In the past, during rapid moves in rates, dividend stocks have sometimes come under pressure as bonds are seen as competition to their payouts. But with investors ramping up their bets on the economy to start 2022, mature companies leveraged to the recovery are finding some love. Those companies are more likely to pay out dividends. Plus, rates are still at low levels. If the economy is recovering, these companies should be able to cover their hefty payouts and are more likely to raise them. Take a look at the top 10 performing stocks in the S & P Dividend ETF so far this year. (Source: FactSet. As of Jan. 5, 2022, around 10:00 a.m. ET.) Exxon Mobil tops the list, gaining more than 9% year to date as of Wednesday morning. The energy company has a dividend yield — how much a company pays out in dividends each year versus its share price — of 5.26%. Other cyclical names among the ETF's top performers that are closely linked to economic growth include steel producer Nucor and construction equipment maker Caterpillar . The two stocks each rose more than 7% on the year by Wednesday morning. AT & T has the biggest dividend yield on the list of the ETF's leaders, with a dividend yield of 7.94%. The stock ran up 6.5% as of Wednesday morning. Medtronic , People's United Financial and Telephone and Data Systems are among the other stocks leading the S & P Dividend ETF higher. —With reporting by Gina Francolla

A view of the Exxon Mobil refinery in Baytown, Texas.

Jessica Rinaldi | Reuters

Dividend stocks reached new highs Wednesday and certain names are leading the way.