The ProShares S&P 500 Aristocrats ETF (CBOE: NOBL) is higher by 23.54% year-to-date, not far off the pace being set by the S&P 500. In NOBL’s case, being nearly inline with the S&P 500 is impressive because the ProShares fund offers lower volatility than broader benchmarks.
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.
NOBL holds 57 stocks and features exposure to 10 of the 11 GICS sectors. The fund’s stellar 2019 showing can be sourced a variety of its holdings and sector weights.
“Leading the pack by a wide margin is retailer Target (TGT), which returned 89.2%, followed by financial information firm S&P Global (SPGI) at 61.5%, industrial conglomerate Dover (DOV) at nearly 59%, corporate uniform maker Cintas (CTAS) at 52.5%, and Leggett & Platt (LEG) at 48%,” reports Lawrence Strauss for Barron’s.
NOBL’s components are equally weighted, a strategy that reduces single stock risk, but retail giant Target is the fund’s top holding at a weight of just over 2%.
Target “enjoyed strong sales growth overall. It reported that for the quarter ended in October, it had same-store sales growth of 4.5%. That was on top of 5.1% comp growth in the year-earlier quarter,” according to Barron’s.
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Dividend-paying companies have exhibited a history of outperforming the markets. Since 1960, dividends have contributed approximately 33% of the S&P 500’s total return.
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.
“S&P Global’s dividend has benefited from strong earnings growth as well. In the third quarter, the company earned $2.46 a share, beating the FactSet consensus estimate by 12 cents, and up from $2.11 a share in the previous year’s third quarter,” according to Barron’s.
That stock is one of NOBL’s financial services holdings, a sector that represents 12% of the ETF’s weight. Importantly, that group has delivered steady dividend growth in recent years, a trend that’s expected to continue in 2020.
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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.