Income-minded investors should consider dividend-growth ETF strategies that specifically target companies with a long track record of steadily raising payouts as a way to mitigate market risks.
“Companies that consistently grow their dividends tend to be high quality with strong fundamentals, stable earnings and long histories of profit and growth. These features have generally enabled dividend growers to withstand market turmoil and deliver strong returns with lower volatility,” according to ProShares.
For example, the ProShares S&P 500 Aristocrats ETF (CBOE: NOBL), which tracks the S&P 500 Dividend Aristocrats Index, targets the cream of the crop, only selecting components that have increased their dividends for at least 25 consecutive years. Consequently, investors are left with a portfolio of high-quality, sustainable dividend payers as opposed to more high-yield focused funds that may contain companies on more precarious financial positions. The ETF shows a distribution yield of 2.34%.
For example, 3M Co., Coca-Cola, Colgate-Palmolive, Dover Corp, Emerson Electric, Genuine Parts, Johnson & Johnson, Procter & Gamble have all offered 55 years of dividend growth. NOBL components with only 25 years of consecutive dividend growth include A.O. Smith Corp., Praxair Inc. and Roper Technologies. The ETF has an average 41.5 consecutive years of dividend growth.