As stocks rallied in June, the ProShares S&P 500 Aristocrats ETF (CBOE: NOBL) gained nearly 5.20%, indicating that even when risk-taking is in style, some conservative dividend exchange traded funds can still deliver for investors.
NOBL tracks the S&P 500 Dividend Aristocrats Index, a benchmark that only includes companies that have boosted dividends for 25 consecutive years. Dividend growth strategies, including NOBL, often feature exposure to the quality factor and a recent analysis of NOBL’s underlying index confirms as much. This year, NOBL’s underlying index is making a habit of topping the broader market.
“Through June 24, the S&P 500 index had a year-to-date return of 18.7%, compared with just under 16% for the S&P 500 Dividend Aristocrats,” reports Lawrence Strauss for Barron’s. “These 57 companies, which have increased their dividends for at least 25 straight years, are a decent proxy for large-cap dividend stock performance.”
Indications that the Federal Reserve could soon lower interest rates could fan the flames of a rally for dividend stocks. If yields on U.S. government debt decline, dividend stocks often become more attractive to income investors.
Added Benefits of NOBL
Companies that have consistently increased dividends tend to be high in quality and show a strong potential for growth. These dividend growers have been able to withstand periods of market duress, exhibiting smaller drawdowns as investors sold off riskier assets, while still delivering strong returns on the upside, to generate improved risk-adjusted returns over the long haul.
Another benefit of NOBL is its nearly 13% weight to the financial services sector, a group that is likely to see higher payouts in the near-term because the Federal Reserve recently approved increased capital distribution plans for a slew of major U.S. banks.
“With the 10-year Treasury note yielding about 2% and the Federal Reserve hinting that an interest-rate cut is in the offing, these stocks look even more attractive compared with assets such as bonds,” according to Barron’s.
NOBL has a dividend yield of 2.21%.
For more on core investing strategies, visit our Core ETF Channel.