This year is turning out to be a tricky one for dividend investors as less than four months into 2020, the S&P 500 is littered with negative dividend news. Focusing on the elite of dividend payers can help investors avoid dividend disappointment and the ProShares Russell U.S. Dividend Growers ETF (CBOE: TMDV) does, in fact, focus on the elite.
The ProShares Russell U.S. Dividend Growers ETF is unique among dividend growth ETFs currently on the market. That new ETF tracks the Russell 3000 Dividend Elite Index, which requires member firms to have minimum dividend increase streaks of at least 35 years.
“Companies with a proven track record of consistently growing their dividends over time have generally outperformed those that haven’t, with lower volatility. In fact, over the last five years ended March 31 the Russell 3000® Dividend Elite Index had a 44% total return with a 12.9% standard deviation, as compared to a 32.4% total return and 14.4% standard deviation for the Russell 3000 Total Return Index for the same time period,” said FTSE Russel in a recent note.
In terms of dividend increase streak requirements among ETFs, only TMDV’s stablemate the ProShares S&P 500 Aristocrats ETF (CBOE: NOBL) comes close to TMDV’s 35-year mandate. NOBL’s requirement for entry is a minimum payout increase of 25 years.
Due to TMDV’s stringent requirement for admission, the fund is an exclusive club with just 67 holdings.
“And in this very volatile market environment, dividend-paying companies may further benefit investors seeking quality and stability. However, when seeking the most consistent dividend growers, a disciplined index-based screening process is an essential part of the equation,” notes FTSE Russell.
The consumer staples, industrial and utilities sectors combine for about 44% of TMDV’s roster. Dividend growth is a hallmark of quality, and these companies provide the best level of dividend growth, with a legacy of stability and strength, demonstrating a history of weathering market turbulence.
“This is a time for investors to be choosy about their dividend-paying stocks, and companies that have consistently grown their dividends year-after-year through a wide range of market conditions have proven popular with investors,” said Kieran Kirwan, Director, Investment Strategy at ProShares. “And in light of current market conditions, the hallmarks of consistent dividend growth – i.e., high quality, durable business models, stable earnings and solid fundamentals – have been even more in demand.”
All but two TMDV holdings exceed the 35-year increase streak requirement and a handful beat it by 30 years or more.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.