Offering a less volatile entry to blue-chip, large-cap stocks with dividend compensation, the ProShares S&P 500 Aristocrats ETF (CBOE: NOBL) is still delivering impressive returns as highlighted by a year-to-date gain of 16.44%.
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.
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.
“The S&P 500 Dividend Aristocrats Index is made up of S&P 500 stocks that have grown their dividends for at least 25 consecutive years,” said Morningstar in a recent note. “A quarter-century of uninterrupted dividend growth is no small feat. As of the index’s January 2019 rebalance, it had just 57 constituents. This group had an average of 41-plus years of consecutive dividend growth.”
NOBL ETF For The Long Haul
With NOBL being a dividend ETF, it is a perfect strategy for long-term investors to consider. Dividend-paying companies have also exhibited a long history of outperforming the markets. Since 1960, dividends have contributed approximately 33% of the S&P 500’s total return.
In the period between 1987 through 2018, dividend growers within the Russell 3000 generated an annualized 13.1% return with an annualized volatility of 14.3%. In comparison, dividend non-changers returned 9.4% with a 16.8% volatility, dividend non-payers returned 6.9% at 23.8% volatility, and dividend cutters saw a 5.8% return with 21.9% volatility.
“NOBL’s bogy applies the most stringent screen on dividend resilience of any index fund on the market,” according to Morningstar. “Large-cap stocks with 25-plus years of steady dividend growth tend to enjoy economic moats: durable competitive advantages that allow them to generate steady cash flows and the confidence to share them with investors.”
The dividend growth story has also consistently outperformed over time. Looking at the three-year rolling returns, the S&P 500 Dividends Aristocrats Index outperformed the S&P 500 111 of the 129 periods, or 88% of the period, from 2005 through 2018.
“The quality of the fund’s holdings has shone through in its performance. From its October 2013 inception, it has held up better than similarly quality-oriented dividend funds during market corrections,” notes Morningstar.
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