This Dividend ETF Should Win Over The Long Haul
Dividend investing is usually most effective long-term holding periods, but knowing that is only half the battle. With so many dividend exchange-traded funds on the market, selectivity is key even for investors looking to buy-and-hold.
The ProShares S&P 500 Dividend Aristocrats ETF (NYSE: NOBL) is an example of a dividend ETF that can deliver for long-term investors and that assertion is being made knowing that NOBL is still a few weeks shy of its third birthday. Earlier this year, NOBL topped $1 billion in assets under management, a total that had more than doubled by the end of the second quarter, according to issuer data.
An Aristocratic Option
NOBL tracks the S&P Dividend Aristocrats Index, which mandates each holding has a dividend increase of at least 25 years. Historical data prove that index has been impressive.
“Since its inception in 2005, this index has had an impressive track record of outperforming the broader S&P 500 — with lower volatility — under a variety of market conditions. The index’s three-year rolling returns reveal the consistency of the index’s risk-adjusted return,” said S&P Dow Jones Indices in a recent note.
Investors cannot invest in an index, so NOBL is the way to gain exposure to the S&P Dividend Aristocrats Index. In its nearly three years on the market, the ProShares ETF has topped the S&P 500 by nearly 500 basis points when accounting for paid dividends. Additionally, NOBL has made a mockery of the Vanguard Dividend Appreciation ETF (NYSE: VIG), the largest U.S. dividend ETF. Since coming to market, NOBL has topped VIG by 1,300 basis points.
Although it focuses on consistent dividend growers, NOBL is not heavily allocated to high-yield sectors. For example, telecom and utilities stocks combine for just over four percent of the ETF's weight. Likewise, due to the fact that dividends in the technology sector are a relatively new concept, that group is NOBL's smallest sector allocation at just over 2 percent.
Regarding the performance of NOBL's index against the S&P 500 over three-year rolling periods, S&P Dow Jones Indices offers up these data points: “The Dividend Aristocrats outperformed during 95 percent of rolling periods from May 2, 2005–June 30, 2016. The Dividend Aristocrats had lower relative volatility than the S&P 500 92 percent of the time. And the Dividend Aristocrats produced excess returns over the S&P 500 during the financial crisis of 2008, in the subsequent rally and during the majority of the periods since then.”
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