Dividend stocks and the related ETFs are often touted as ideas for conservative investors or those seeking reduced volatility and safety. The ProShares S&P 500 Aristocrats ETF (CBOE: NOBL) certainly merits a place in that conversation.
NOBL tracks the S&P 500 Dividend Aristocrats Index, a benchmark that only includes companies that have boosted dividends for 25 consecutive years. Dividend growth strategies, including NOBL, often feature exposure to the quality factor and a recent analysis of NOBL’s underlying index confirms as much.
NOBL has recently been receiving increased attention as way to avoid the recent uptick in equity market turbulence. Further analysis confirms the ETFs 57 holdings include some safety plays.
“Stocks of companies that pay robust and growing dividends are generally less volatile in times of market turmoil—as was the case in last year’s fourth quarter, when the S&P 500 index lost 13.5%, dividends included,” reports Lawrence Strauss for Barron’s. “And dividends, especially those that are growing and are well covered by cash flows, can provide steady income in times of uncertainty.”
Safe Bets
NOBL has a dividend yield of 2.13%. Over the long-term, dividend strategies top the S&P 500 on a total return and an absolute basis. Reinvesting dividends is also a vital part of the equation. For the three years ended Jan. 29, 2019, including dividends reinvested, NOBL returned 44.30 percent compared to 35.50% without dividend reinvestment.
The Barron’s highlighted some dividend stocks with the capability to continue raising payouts. Not surprisingly, a pair of NOBL components appeared on the list: Air Products & Chemicals (NYSE: APD) and McCormick (NYSE: MKC).
“The case for dividend stocks has rarely been stronger,” according to Barron’s. “Lower interest rates—especially with the Federal Reserve signaling that it will not raise rates this year—provide support by making bonds less of a threat to dividend stocks.”
For long-term investors, dividend strategies like NOBL have another benefit: the ability to reinvest dividends at a lower price when markets decline.
“Another reason to favor dividend stocks now is concerns over weakening corporate profit growth—and how it could hurt stocks. When stocks decline, those dividends can be reinvested at a lower price,” according to Barron’s.
Investors have added $157.43 million to NOBL since the start of the second quarter.
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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.