The dividend aristocrats concept is undoubtedly alluring to income investors.
Building an exchange traded fund around companies that have boosted dividends for a minimum of 25 consecutive years has helped make the SPDR S&P Dividend ETF (NYSEArca: SDY) one of the largest U.S. dividend ETFs with over $12 billion in assets under management. SDY tracks the S&P High Yield Dividend Aristocrats Index, which is a high yield variation of the traditional aristocrats index. Nonetheless, the requirement for admission to SDY is a quarter century dividend increase streak.
The dividend aristocrats concept has also helped make the ProShares S&P 500 Aristocrats ETF (NYSEArca: NOBL) one of the most successful ETFs to debut in recent months. Following a third-quarter 2013 debut, NOBL has pulled in almost $39 million just this year. [New Dividend ETFs to Consider]
There are other ETF avenues for accessing the dividend aristocrats,including the $336.1 million PowerShares Dividend Achievers Portfolio (NYSEArca: PFM). PFM tracks the NASDAQ US Broad Dividend Achievers Index, which requires a dividend increase streak of 10 years, but that is good enough to make the fund an “accidental” aristocrats destination.
PFM’s top-10 holdings, a group that combine for nearly a third of the fund’s weight, features nine members of the Dow Jones Industrial average and eight dividend aristocrats, though outliers IBM (NYSE: IBM) and United Technologies are not slouches on the dividend increase front.
Pull IBM and United Technologies out and the dividend aristocrats in PFM’s top-10 lineup still account for about 26% of the ETF’s weight. At least five more consumer staples aristocrats combining for 5% of PFM appear in the ETF. Staples is the fund’s largest sector weight at almost 23%.