As inflation continues to march on without an end in sight, investors are turning to dividend-paying stocks to provide some refuge from its effects.
While the status of dividend-paying stocks is always precarious — indeed, many dividends were reduced or eliminated after the recent economic downturn — there is a group of dividend-paying stocks whose members have a reputation for stability and consistency in their dividend payouts. Enter the Dividend Aristocrats.
To earn this coveted label, a stock in the S&P 500 must have increased its dividend annually for at least the past 25 consecutive years. There are 65 stocks currently on this list as of 2021, ranging from the unglamourous Federal Realty Investment Trust (NYSE: FRT) to the well-known Coca-Cola Co. (NYSE:KO). In addition, an exchange-traded fund known as the ProShares S&P 500 Dividend Aristocrats ETF (BATS: NOBL) may show a way to tap into these stocks without having to own each one individually.
Like its parent list, the stocks in this exchange-traded fund’s (ETF) portfolio are selected from a list of companies on the S&P 500 that have increased their dividends for at least the past 25 consecutive years. All holdings are weighted equally, and each sector is limited to no more than 30% of the portfolio. At the same time, this methodology results in traditional dividend-paying sectors being overweighted in the portfolio.
Currently, the fund’s top holdings include Nucor Corporation (NYSE:NUE), Target Corporation (NYSE:TGT), Exxon Mobil Corporation (NYSE:XOM), Expeditors International of Washington, Inc. (NASDAQ:EXPD), West Pharmaceutical Services, Inc. (NYSE:WST), Franklin Resources, Inc. (NYSE:BEN), T. Rowe Price Group (NASDAQ: TROW) and the Cincinnati Financial Corporation (NASDAQ:CINF).
This fund’s performance has been relatively strong, even when including the damage done by the COVID-19 pandemic. As of June 29, NOBL has been down 1.55% over the past month and up 4.57% for the past three months. It is currently up 14.19% year to date.
Chart courtesy of www.stockcharts.com
The fund has amassed $8.6 billion in assets under management and has an expense ratio of 0.35%, making it less expensive to hold than many other ETFs.
While NOBL does provide an investor with a way to profit from the Dividend Aristocrats, this kind of ETF may not be appropriate for all portfolios. Thus, interested investors always should conduct their due diligence and decide whether the fund is suitable for their investing goals.