With 10-year Treasury yields sliding lower and the Federal Reserve poised to lower interest rates again this year, perhaps multiple times, dividend stocks are an increasingly valuable asset class. Moreover, dependable dividend growers, accessible via ETFs such as the ProShares S&P 500 Aristocrats ETF (CBOE: NOBL), should be an area of emphasis for income investors.
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.
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.
“Investors have piled into safe-haven Treasurys recently, pushing bond yields to their historic lows last week as stocks sold off,” reports CNBC. “If the market remains shaky in the face of a slowing global economy and the intensified trade war, investors may look to stocks with more steady dividend income, according to Goldman Sachs.”
Dividend Growth Should Be Better Than Expected
NOBL yields around 2%, implying ample room for dividend growth going forward. That’s an essential trait at a time when markets may not be pricing in the appropriate level of S&P 500 dividend growth for next year. Translation: next year’s dividend growth should be better than expected.
Financial services, healthcare, and technology stocks combine for about a quarter of NOBL’s weight while the ETF features no utilities exposure and just a 1.8% weight to the real estate sector, according to ProShares data.
“However, the reality is that U.S. companies are increasing dividends steadily with the S&P 500 dividends rising by 9% in the first and second quarters this year,” reports CNBC. “Goldman predicted the S&P 500 annualized dividend growth to be 3.5% during the next decade.”
“Goldman screened stocks with strong dividend growth and high dividend yields, based on their dividend estimates and payout ratios. The average stock in its basket has a dividend yield of 3.8% versus 2.1% for the typical S&P 500 stock,” according to CNBC.
For more on core investing strategies, visit our Core ETF Channel.