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.
To better track this group of quality company stocks, investors can look to the ProShares S&P 500 Aristocrats ETF (BATS: NOBL), which measures stocks with a long track record of dividend growth with companies increasing dividends for at least 25 consecutive years. Of the companies within the underlying index, 64% have grown their dividends more than 40 years and 17% grown their dividends more than 50 years.
When the markets experienced wild swings, dividend aristocrats remained on a relatively more stable footing. For example, over the period between October 2018 and December 2018, when the S&P 500 fell close to 14%, the S&P 500 Dividend Aristocrats Index dipped 8.6%. The dividend aristocrats characteristic also held up over the mid- and small-cap categories, with the S&P MidCap 400 Dividend Aristocrats Index down 8.5% compared to the S&P MidCap 400’s 17.3% decline and the Russell 2000 Dividend Growth Index 8.0% lower compared to the Russell 2000’s 20.2% drop off.
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 the 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.
Financial advisors who are interested in learning more about the dividend strategy can watch the webcast here on demand.