Doing anything consistently for 20 or more consecutive years is hard to imagine. Yet, 69 companies in the S&P 500 Index and 149 companies in the S&P 1500 indexes have a two-decades long ongoing streak for hiking their dividends annually. Nearly two dozen companies recently joined an elite club known as the dividend aristocrats.
Meet the Newest Dividend Aristocrats
The ProShares S&P 500 Dividend Aristocrats ETF (NOBL) holds shares of companies with 25 years of dividend increases. These companies are also part of the S&P 500 Index. At the end of January, NOBL added three new constituents. Two of them are in the financial sector: Erie Indemnity Company, a property and casualty insurance company, and FactSet Research, a financial data and software company. The third company, Eversource Energy, is in the utilities sector.
The addition of Eversource Energy boosted NOBL’s sector weighting. At 6% of assets, NOBL’s utilities weighting was recently more than double that of the S&P 500 Index. Meanwhile, the addition of two financials helps to reduce the sector underweight for the dividend ETF. NOBL’s 13% in financials modestly trails the 14% in the S&P 500.
The new additions joined some well-known companies. AbbVie, part of the 10% stake in healthcare and Coca-Cola, part of the 23% in consumer staples, are two examples. Meanwhile, IBM is part of the 3% stake in information technology. NOBL is significantly underexposed to tech stocks.
Dividend Growth Comes From Large & Small Companies
The SPDR S&P Dividend ETF (SDY) takes a multicap approach focusing on companies in the S&P 1500 Index. The fund’s 18 new entrants have 20 years of consecutive dividend hikes. Some of the recent additions are prominent large-caps, while others I had to look up.
For example, Costco Wholesale and Verizon Communications joined SDY this year. Costco adds to the hefty 17% consumer staples stake for SDY. Meanwhile, Verizon increases NOBL’s position in communications services to a still-low 3%. Meanwhile, smaller companies new to SDY included materials company Hawkins and utilities company M&G Energy. NOBL recently had 16% and 8% of assets, respectively, invested in utilities and materials stocks.
A company only needs to have two decades of dividend hikes to make it into SDY. However, according to S&P Dow Jones Indices, there were more than 69 companies in the index behind SDY that had raised their dividend for 35 years.
Not All Dividend Payers Have Long Histories
As we wrote in January, there are other large-cap dividend growth ETFs besides NOBL and SDY. Many companies have initiated dividends in the last few years. The WisdomTree US Quality Dividend Growth Fund (DGRW) is one of the index funds. The T. Rowe Price Dividend Growth ETF (TDVG) is an active ETF.
Meanwhile, Simplify recently filed to offer a novel U.S. large-cap index fund that should come to market in the second quarter The VettaFi index includes companies that started current dividend payments in the last 36 months, such as Alphabet and Meta Platforms.
High-Dividend-Yielding ETF Change Positions Too
While some dividend ETFs change their constituents annually due to dividend growth, others do so for dividend yield considerations. The ALPS Sector Dividend Dogs ETF (SDOG) is one such example. This fund holds the five highest-yielding large-cap stocks in 10 sectors. Following the latest rebalance, 17 stocks were added to the ETF, replacing 17 others from within the same sectors.
For example, Exelon was added to the portfolio as a utility sector representative, while Duke Energy was removed. Meanwhile, Cisco Systems is now an information technology position in SDOG, but Texas Instruments is not.
Advisors recently told VettaFi of their strong interest in dividend ETFs. We remind them now to make sure they know what the fund owns, since it changes at least annually.
VettaFi LLC (“VettaFi”) is the index provider for SDOG, for which it receives an index licensing fee. However, SDOG is not issued, sponsored, endorsed, or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of SDOG.
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