As Markets Became More Volatile It’s Right Time to Consider Dividend Aristocrats ETFs
September 27, 2021
As the global economy is at the crossroads again, being plagued with looming new delta Covid related restrictions, global indices are turning more and more volatile. The growth stocks, although still posting single-to-double-digit gains, are now looking much riskier than in the pandemic-impacted 2020.
The ProShares S&P 500 Dividend Aristocrats ETF (NOBL) invests in high-quality dividend-paying companies and has rewarded its investors with a 25% growth in the last 12 months. It comprises the companies that have consecutively grown their dividend payouts in the last 25 years. NOBL presently invests in 65 stocks of high-quality (but non necessarily blue-chip) companies. Approximately 17% of its total assets are invested in its top 10 holdings.
Overall, this ETF is just one of the many dividend plays, including VIG and REVS on the combined price-momentum-dividend-yield front. But what’s good about NOBL is that based on the fund’s investment premise, any investor will perceive that NOBL is an income-and-growth play. NOBL has gained 25% in the last 12 months, plus the fund has rewarded investors with a rather modest, this time around, TTM dividend yield of 1.96%. NOBL performed at a steady pace since its inception in late-2013 – the only turbulence that the ETF faced happened when Covid-19 broke into the market. Other than this “black swan” look-alike event, the fund has grown steadily year over year.
Going forward, there are certain grounds to believe that these ETFs are to deliver a reasonable capital appreciation coupled with a very modest dividend yield. Investing in dividend ETFs is also just an easy strategy to follow. Investors who own a portfolio of individual stocks typically have at least several dozen holdings to pick between when they have new money to invest.
However, there is a never-ending debate over the merits of actively picking stocks versus allocating a portfolio completely into low-cost, passively-managed ETFs. But what is more important is that dividend ETF investors do not need to worry about monitoring their holdings because many ETFs are diversified across hundreds of companies. In other words, no single company is likely going to continuously outperform any dividend yield-seeking ETF, so there is virtually no purpose to stay up to date on news about individual businesses owned in the fund.
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