ETFs that track dividend growers with a long track record of increasing payouts have exhibited a quality defensive characteristic that’s helped investors weather some of the recent market storms.
“Our approach is to focus on companies with long track records of increasing their dividends, and it’s an incredible quality screen,” Simeon Hyman, Global Investment Strategist, ProShares, said at the 2019 Charles Schwab IMPACT conference.
For example, the ProShares S&P 500 Aristocrats ETF (NOBL), which tracks the S&P 500 Dividend Aristocrats Index, is ProShares’ flagship dividend growth ETF strategy that 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 as opposed to more high-yield focused funds that may contain companies in more precarious financial positions.
ProShares also offers dividend growth ETFs that focus on other market segments, like the ProShares Russell 2000 Dividend Growers ETF (SMDV) and the ProShares S&P MidCap 400 Dividend Aristocrats ETF (REGL) for those seeking quality dividend growers in the small- and mid-cap categories, respectively. The mid-cap Dividend Aristocrats Index, though, only requires 15 consecutive years of increased dividends for inclusion. SMDV, a dividend spin on the Russell 2000, the benchmark U.S. small-cap index, tracks the Russell 2000 Dividend Growth Index, which includes small-cap firms with dividend increase streaks of at least a decade.
“They all had tremendous down capture – in other words, tremendous protective qualities,” Hyman said. “Last Q4, that shined the extra spotlight on them, and they’re participating reasonably well – so as people are stuck in that bucket of wanting to participate but know they have quality stocks.”
Investors can diversify into international markets while tracking similar dividend growth strategies. For instance, the ProShares MSCI EAFE Dividend Growers ETF (EFAD) tracks developed market Europe, Australasia and Far East companies that exhibit a minimum dividend increase streak of 10 years.
The ProShares MSCI Europe Dividend Growers ETF (EUDV) tracks the performance of the MSCI Europe Dividend Masters Index, which consists of at least 25 European companies that have consistently increased their dividends for at least 10 consecutive years.
The ProShares MSCI Emerging Markets Dividend Growers ETF (EMDV) follows the MSCI Emerging Markets Dividend Masters Index, which targets MSCI Emerging Market components that have increased dividend payments each year for at least seven consecutive years.
Additionally, ProShares recently added to its burgeoning lineup of dividend growth ETFs with the launches of two funds – the ProShares Russell U.S. Dividend Growers ETF (TMDV) and the ProShares S&P Technology Dividend Aristocrats ETF (TDV).
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