Up nearly 18% year-to-date, the ProShares S&P 500 Aristocrats ETF (CBOE: NOBL) is been steady for much of this year, including the third quarter when a slew of S&P 500 boosted dividends.
NOBL tracks the S&P 500 Dividend Aristocrats Index, targets the cream of the crop, only selecting components that have increased their dividends for at least 25 consecutive years. Consequently, investors are left with a portfolio of high-quality, sustainable dividend payers.
“According to S&P Dow Jones, there were 426 dividend increases in the third quarter of 2019, down from 460 a year earlier. Meanwhile, this year there were 94 decreases, up from 67,” said Todd Rosenbluth, director of ETF & Mutual Fund Research at CFRA Research, in a note out Monday. “The narrowed dividend breadth highlights the benefits of an ETF’s diversification.”
For long-term investors, particularly those with a time frame that can indulge reinvesting dividends, payout growth can have a substantial, positive impact on total returns, underscoring the point that dividend growth matters.
Levered To Growth
“Investors seeking equity income have a wide array of individual securities to consider. There are 423 issues (84%) within the S&P 500 Index that currently pay a dividend, up from 422 (83.6%) a year earlier,” said Rosenbluth.
Some sectors are known for dividends, including consumer staples and industrials. In the S&P 500, an average of 95% of the constituents in those sectors pay dividends and those groups are the two largest sector weights in NOBL, combining for over 45% of the fund’s weight.
Improving earnings growth could bolster dividend growth in 2020. Investors should consider quality dividend growth stocks that typically exhibit stable earnings, solid fundamentals, strong histories of profit and growth, commitment to shareholders, and management team convection in their businesses.
“NOBL’s third-largest sector allocation is financial services 97% of S&P 500 members from that group are also dividend payers. The group has been one of the leading sources of payout growth in the U.S. during this decade,” according to Benzinga.
Increasing the allure of NOBL for long-term investors is the ETF’s documented reputation of being less volatile than traditional equity benchmarks and performing less poorly than those indexes when stocks struggle.
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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.