Dividend ETFs, including the ProShares S&P 500 Aristocrats ETF (CBOE: NOBL), are performing well in 2019. In fact, NOBL and some rival dividend funds have recently been hitting record highs, but as seasoned dividend investors, dividend investing is more rewarding over the long-term and focusing on short-term performance is not the primary objective of dividend investing.
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.
“These are heady days for dividend lovers,” according to Kiplinger’s Personal Finance. “Dozens of companies with excellent track records are providing investors with annual payouts that exceed yields on five- and even 10-year Treasury bonds. Yes, Treasuries may be safer, but dividends tend to rise over time. Plus, when your T-bond matures, you simply get back its original face value—unlike stocks, which can appreciate.”
NOBL is up more than 13% this year while a large ETF dedicated to long-dated Treasuries is higher by just two-thirds of a percent.
More About NOBL’s Advantages
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 answer is that investing in stocks that pay dividends—especially rising dividends—turns out to be a terrific strategy,” according to Kiplinger’s. “The S&P 500 Dividend Aristocrats index has returned an annual average of 18.3% over the past 10 years, compared with 17.1% (including dividends) for the S&P 500 as a whole. Usually, higher returns indicate higher risk, but the Aristocrats have achieved their returns with less volatility than the full S&P.”
NOBL allocates nearly 46% of its combined weight to the industrial and consumer staples sectors, two groups that are home to some of the longest dividend increase streaks in Corporate America.
“Companies that want to maintain a record of dividend hikes are run conservatively because the worst calamity for them is a dividend cut. In investing, a great way to make money is to avoid firms that take too many risks and concentrate instead on the plodding winners,” notes Kiplinger’s.
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