First S&P Dividend Aristocrats ETF Debuts

by Dan Burrows | October 10, 2013 10:42 am

Rock-bottom interest rates have investors hunting for yield, so naturally, providers of exchange-traded funds are happy to oblige them.

ProShares on Thursday launched the S&P 500 Aristocrats ETF (NOBL[1]), which tracks the S&P 500 Dividend Aristocrats Index. If you’re new to income investing, the Dividend Aristocrats Index is composed of companies that have hiked their payouts every year for at least 25 years.

“The Aristocrats are the strongest of the strong in the S&P 500 — the companies with the best track records of increasing dividends,” ProShare Advisors CEO Michael Sapir said in a media release[2].

Since its inception in 2005, the Dividend Aristocrats index generated an annual total return of 9.7%, beating the S&P 500 by 3 percentage points — all while being significantly less volatile, ProShares notes.

NOBL is the first fund to invest in the Dividend Aristocrats, which include companies such as AT&T (T[3]), Walgreen (WAG[4]) and Lowe’s (LOW[5]).

The SPDR S&P Dividend ETF (SDY[6]) is a similar offering, but it casts a much wider net, tracking the S&P High Yield Dividend Aristocrats Index. That benchmark is comprised of the highest-yielding stocks in the S&P Composite 1500 that have raised dividends every year for at least 20 straight years.

NOBL kicks off with a dividend yield of 2.57%. Sure, there are plenty of stocks that pay better, but remember that many of these stocks aren’t as reliable. More importantly, the companies raise their dividends every year. If the total dollar value of the fund’s payouts rises over time — as it should, though the rare instance of a dividend cut and expulsion of a component would affect this — eventually the dividend as a percentage of your original cost basis could easily hit mid-single digits or more.

NOBL is an equal-weighted fund with a competitive expense ratio of 0.35%.

As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.

  1. NOBL:
  2. media release:
  3. T:
  4. WAG:
  5. LOW:
  6. SDY:

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