Three Ways to Buy Dividend Aristocrats

04/25/2016 9:00 am EST

Focus: ETFs

Jimmy Mengel

Editor, Outsider Club

We love dividend aristocrats — stocks that have raised their dividend consistently for at least 25 years running, explains Jimmy Mengel, editor of The Crow’s Nest.

We dedicate a lot of our portfolio to these stocks — and for good reason. They are ironclad investments in times of uncertainty in the market.

Dividend-paying stocks are the major sources of income for investors when returns from the equity market are either low or negative.

The most common concern folks have is that they do not want to buy a dozen stocks and keep track of them all. For those who just want an ETF to track dividend aristocrats, here are a couple solid choices to make your life a bit easier.

ProShares S&P 500 Aristocrats ETF (NOBL)

This ETF tracks the S&P 500 Dividend Aristocrats and provides exposure to 50 companies.

Consumer staples is the top sector, while industrials, health care, consumer discretionary, and financials round off the next three spots. The fund has $1.7 billion in assets and an expense ratio of 0.35%.

NOBL returned 4.1% over the past year and has an annual dividend yield of around 2%.

SPDR S&P Dividend ETF (SDY)

This is one of the most popular dividend ETFs out there, and holds net assets of $12.25 billion. SDY provides exposure to the 109 US stocks that have been consistently increasing their dividends every year for at least 25 years.

This is done by tracking the S&P High Yield Dividend Aristocrats Index. Sector wise, financial stocks lead. Industrials, utilities, consumer staples, and materials make up a nice balance for the portfolio with double-digit allocations each.

It currently yields 2.53% in annual dividend. It has added 2.9% so far this year. SDY has returned an impressive 45% over the past five years.

ProShares Russell 2000 Dividend Growers ETF (SMDV)

This is a more recent fund — it debuted last February — and it is currently managing around $30 million in assets.

It follows the Russell 2000 Dividend Growth Index and offers exposure to 56 Russell 2000 companies that have increased dividends every year for at least 10 consecutive years.

Not quite aristocrat material, but these companies may get there if they keep up their current rate.

Utilities dominate the fund’s portfolio with 30% of holdings, followed by 19% exposure each in financials and industrials. There is a 0.40% expense ratio. The fund gained 6% over the past year and yields 1.78% in annual dividend.

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By Jimmy Mengel, Editor of The Crow’s Nest

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