With interest rates stuck near historical lows, retirees may find it harder to meet their income needs through bonds alone. Instead, more should think about adding dividend-paying stocks and related exchange traded funds to bolster yields.
Dividend stocks and ETFs may also enjoy dividend growth, along with capital appreciation, which could also help an investor maintain his or her nest egg longer. Consequently, with a larger portion of retirement money invested in dividend stocks, an investor would not be forced to withdraw, or sell off assets, from his or her portfolio as quickly to meet annual income needs, assuming if total yields fall short of the target 4% withdrawal rate. [ETF Options to Generate Income for Retirement]
Of course, dividend growth and consistency of that growth is of the utmost importance. The ProShares S&P 500 Aristocrats ETF (NYSEArca: NOBL) is one of the dividend aristocrats ETFs. Dividend aristocrats are those S&P 500 members that have increased dividends for at least 25 consecutive years.
When building a diversified investment portfolio, investors may turn to various dividend-paying stock exchange traded funds to generate some extra income.
In an environment of near-zero interest rates and quantitative easing, dividend stocks have attracted investors seeking a better source of income, Ben Johnson, director of global ETF research at Morningstar, said.
“What makes NOBL different from other dividend ETFs is that the fund equally weights its holdings, which reduces concentration risk,” reports Newsmax.
NOBL is also lightly allocated to the utilities and telecom sectors, meaning the ETF is not as vulnerable to rising interest rates as are some rival dividend funds.
Earlier this year, NOBL was named ETF Product of the Year at the William F. Sharpe Indexing Achievement Awards, presented at the annual IMN Global Indexing & ETFs conference in Scottsdale, Arizona, according to a statement issued by ProShares.
What makes NOBL an alluring option among dividend ETFs is that even though the ETF is home to plenty of mature, old line companies, as evidenced by the 25-year dividend increase streak requirement, the ETF sports a yield of less than 2%. That implies ample room for dividend growth even if interest rates rise.
The potency of dividends and dividend growth in rising rate environments is not surprising because dividend growth, historically, tops inflation.
Since the early 1970s, when inflation ran as high as 11% per year, aggregate annual dividends of the S&P 500 have grown more than 1,000%, to $34.99 from $3.16 a share, Maxwell Murphy reports for the Wall Street Journal.
ProShares S&P 500 Aristocrats ETF
