Mid-cap stocks were solid performers in 2019 with the widely followed S&P MidCap 400 Index finishing higher by 24%. Investors that are new to mid caps or simply want lower volatility and higher income should consider the ProShares S&P MidCap 400 Dividend Aristocrats ETF (CBOE: REGL) in 2020.
REGL follows the S&P MidCap 400 Dividend Aristocrats Index, the dividend derivative of the S&P MidCap 400. The ProShares fund’s mandate is a minimum dividend increase streak of 15 years, which is high in the universe of mid-cap equities.
The combination of dividends and mid caps is potentially potent for committed investors because traits are winners over the long-term.
“In practice, the theory holds true over longer periods of time,” reports Kiplinger. “Over the past 20 years, constituents of the Russell Midcap index, which currently sport market caps between $2 billion and $35 billion, have boosted earnings per share at a faster rate, on average, than their large- and small-cap counterparts. During the same period, mid caps have been about 14% more volatile than stocks in the large-cap Standard & Poor’s 500-stock index and 15% less volatile than the small-cap Russell 2000 index. And in just about any time frame you choose—whether it’s 10, 15, 20 or 30 years—mid-cap stocks have outperformed both their smaller and larger counterparts.”
Inside REGL
Just 51 stocks meet the requirement for entry to REGL and its underlying benchmark, indicating the fund holds cream of the crop mid-cap fare. Financial services names represent over 24% of the fund’s weight while the industrial and utilities sectors combine for over 36%.
“In theory, midsize-company stocks operate in a sweet spot for investors,” according to Kiplinger. “No longer struggling to get out of the gates, these financially mature firms, led by experienced executives, should come with more stability than small companies. They should also offer greater potential for growth than mega-size firms, whose shares have market capitalizations (stock price multiplied by shares outstanding) that run into the hundreds of billions.”
The mid-cap category has also outperformed their larger peers, but with lower volatility than small caps. Moreover, the returns of mid-cap stocks have also beaten those of small-cap stocks during the trailing three-, five-, and 10-year periods, with lower volatility.
In 2019, investors added nearly $286 million to REGL.
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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.