A chronicle of companies moving in and out of the S&P 500 Dividend Aristocrats index may not be as riveting as an episode of The White Lotus. But look behind the scenes. Stock market volatility is heightened these days, signaling a possible inflection point in market leadership. It’s a good time, then, for investors to turn their attention to stocks that pay dividends, especially the stocks of high-quality companies with steadily increasing payouts.
That’s the stomping ground of the Dividend Aristocrats index, which includes only companies in the S&P 500 benchmark that have consistently raised dividends for at least 25 consecutive years. Coca-Cola, Procter & Gamble and Walmart are longtime Aristocrats members.
Earlier this year, as part of the benchmark’s annual reconstitution, three new companies were added: insurance company Erie Indemnity, energy provider Eversource Energy, and FactSet Research Systems, which provides financial data and analytic services to investors. There were no deletions.
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ProShares S&P 500 Dividend Aristocrats (NOBL)
Exchange-traded fund ProShares S&P 500 Dividend Aristocrats (NOBL, $104, expense ratio 0.35%) is the only U.S. fund that tracks the Dividend Aristocrats index, which currently includes 69 stocks.
The ETF is an antidote of sorts to the concentration of the Magnificent Seven, those tech-related firms that drove market returns for much of the past two years. None of the Seven are Aristocrats, for starters; two of them, Amazon.com and Tesla, don’t even pay a dividend. And the Aristocrats index is equal-weighted — assets are evenly divided by each stock in the index, regardless of market value, dividend yield, or any other measure — and rebalanced quarterly. “It’s a ward against single-stock concentration,” says a spokesperson for S&P Dow Jones Indices. The ETF also yields 2.5%, which is better than the 1.2% yield of a comparable S&P 500 ETF.
Naturally, the absence of the Magnificent Seven in the Aristocrats index has hurt the relative recent returns of the ProShares S&P 500 Dividend Aristocrats ETF. Over the past five years, the ETF’s 11.5% annualized return has lagged the 16.9% average annual gain in the straight-up S&P 500. But over longer hauls, the Aristocrats index has turned in similar returns to the S&P 500, with less volatility.
Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.
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