Income-minded investors have found quality investment exposure through dividend-growth ETF strategies that specifically target companies with a long track record of steadily raising payouts.
For example, the S&P 500 Dividend Aristocrats Index acts as the underlying index for the popular ProShares S&P 500 Aristocrats ETF (BATS: NOBL) and is comprised of companies that have consecutively raised dividends for at least 25 years.
ProShares also offers the ProShares Russell 2000 Dividend Growers ETF (BATS: SMDV) and the ProShares S&P MidCap 400 Dividend Aristocrats ETF (BATS: REGL) for those seeking quality dividend growers in the small- and mid-cap categories, respectively. REGL tracks a Dividend Aristocrats Index. The mid-cap Dividend Aristocrats Index, though, only requires 15 consecutive years of increased dividends for inclusion. SMDV, a dividend spin on the Russell 2000, the benchmark U.S. small-cap index, tracks the Russell 2000 Dividend Growth Index, which includes small-cap firms with dividend increase streaks of at least a decade.
“We take a very simple approach with dividend growth because it’s all about finding quality companies. Screening for those who can increase their dividends every year, even in difficult financial times, gives you companies with strong balance sheets, strong franchises, good track record of growing earnings and even cash flow,” Simeon Hyman, Head of Investment Strategy for Proshares, said at the recent Morningstar ETF Conference.
Investors can also diversify into international markets while tracking similar dividend growth strategies. For instance, the ProShares MSCI EAFE Dividend Growers ETF (BATS: EFAD) tracks developed market Europe, Australasia and Far East companies that exhibit a minimum dividend increase streak of 10 years.
The ProShares MSCI Europe Dividend Growers ETF (BATS: EUDV) tracks the performance of the MSCI Europe Dividend Masters Index, which consists of at least 25 European companies that have consistently increased their dividends for at least 10 consecutive years.
The ProShares MSCI Emerging Markets Dividend Growers ETF (BATS: EMDV) follows the MSCI Emerging Markets Dividend Masters Index, which targets MSCI Emerging Market components that have increased dividend payments each year for at least seven consecutive years.
“Now that folks have turned their attention internationally, as the economies in the world are improving, developed international stocks have begun to outperform and emerging market stocks have begun to outperform, attention has been shifting as well to our international dividend growers,” Hyman said.
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