With 2020 shaping up to be a tough year for dividends, dependable payout growth takes on added meaning and that’s a theme investors can access via the ProShares S&P 500 Aristocrats ETF (CBOE: NOBL).
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’s roster of just over 65 stocks indicates the fund is an exclusive club of dividend growth names. NOBL’s lineup could shrink a bit when the fund is rebalanced next because it appears unlikely that Dow components Caterpillar (NYSE: CAT), Chevron (NYSE: CVX), and Exxon Mobil (NYSE: XOM) will boost payouts this year. That said, those companies probably won’t be cutting dividends, either.
Onto the Good News
Against the coronavirus backdrop, it’s not surprising that the S&P 500 is home to some negative dividend action this year.
“With the pandemic period now in the ‘end-of-the-beginning’ phase, investors are considering how to position their portfolios for the—let’s call it—medium term,” said ProShares Head of Investment Strategy Simeon Hyman in a recent note.
Even with this year’s glum dividend news, payouts maintain a vital instrument for long-term investors.
“Many investors are familiar with the historically important role dividends have played in the equity markets, accounting for around one-third of the S&P 500’s return over the decades,” said Hyman. “In the challenging decade of the 1970s, however, dividends contributed nearly three-quarters of the equity markets’ return. Hence, the paradox: In a challenging economic and market environment, with heightened concerns around companies cutting dividends, dividends may be even more important.”
While it’s often easy for bad news to overshadow positive headlines, the fact is plenty of NOBL components are boosting payout this year.
For example, Coca-Cola (NYSE: KO), Johnson & Johnson (NYSE: JNJ), Pepsico (NASDAQ: PEP) and Procter & Gamble (NYSE: PG), just to name a few, are among the NOBL holdings sticking to their rich histories of dividend growth this year.
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.
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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.