Income investors know a dividend is nice, but a consistently growing payout is even better. Hence, the popularity of the S&P Dividend Aristocrats indexes and the exchange traded funds that track those benchmarks.
To qualify for admission to either the S&P Dividend Aristocrats Index or the S&P High Yield Dividend Aristocrats Index, companies must have minimum dividend increase streaks of at least 20 or 25 years and yes, Standard & Poor’s does remove companies that fail to keep those streaks alive.
With that in mind, the SPDR S&P Dividend ETF (NYSEArca: SDY), which is benchmarked to the S&P High Yield Dividend Aristocrats Index, is about to make some changes. SDY’s underlying index mandates constituent firms have a minimum dividend increase streak of 20 years for inclusion.
At the close U.S. markets Friday, the S&P High Yield Dividend Aristocrats Index will part ways with Diebold (NYSE: DBD), Energen (NYSE: EGN) and Family Dollar (NYSE: FDO) while welcoming Albemarle (NYSE: ALB), CDK Global (NYSE: CDK), Essex Property (NYSE: ESS) Expeditors International (NasdaqGS: EXPD), Mercury General (NYSE: MCY), Realty Income (NYSE: O) and Ross Stores (NasdaqGS: ROST).
Five of those stocks have dividend increase streaks of 20 years while Mercury General and CDK have payout increase streaks of 28 and 40 years, respectively, according to S&P Dow Jones Indices. Three of SDY’s new additions are financial services firms. The sector is already the ETF’s largest at a weight of 21.5%. Financial services and consumer discretionary are the only two sectors expected to deliver double-digit dividend growth this year. [Dividend Growth Buoys Dividend ETFs]
Home to almost $14 billion in assets under management, SDY is one of the largest U.S. dividend ETFS. The ETF has a trailing 12-month yield of 2.26%.
The S&P 500 Dividend Aristocrats Index, which only includes companies that have increased their dividends for at least 25 consecutive years, serves as the benchmark for the increasingly popular ProShares S&P 500 Aristocrats ETF (NYSEArca: NOBL). At the close Friday, that index will part ways with Family Dollar. No new additions are being made to the index at this time, according to S&P Dow Jones Indices.