Dividend Aristocrats ETF Joins The $1 Billion Club

Markets Benzinga

The ProShares S&P 500 Dividend Aristocrats ETF (NOBL) is the latest exchange-traded fund to hit $1 billion in assets under management, and the fund did so in short order, racing to that milestone after coming to market in October 2013.

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Last year was another banner one for U.S. dividend growth, but with higher interest rates in place and more rate hikes expected, S&P 500 dividend growth is anticipated to slow in 2016.

Knowing that and following the struggles encountered by some dividend exchange-traded funds in 2015, income investors need to be selective with their dividend ETFs in 2016. That increased selectivity should include NOBL.

Related Link: How Will Dividend Stocks Perform This Year?

ETF Royalty: NOBL Ascends The Throne

Maryland-based ProShares, the largest issuer of inverse and leveraged ETFs, confirmed NOBL's ascent to the $1 billion in assets under management in a statement issued Thursday.

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NOBL tracks the S&P Dividend Aristocrats Index, which mandates each holding has a dividend increase of at least 25 years. The ETF is also an equal-weight fund, which helps mitigate stock-specific risk. At the end of the third quarter, none of NOBL's 51 holdings commanded a weight of more than 2.25 percent.

Since its inception in May 2005 through 12/31/2015, the S&P 500 Dividend Aristocrats Index (NOBLs index) has returned 10.2 percent annually vs. 7.7 percent annually for the S&P 500, with volatility of 19.0 percent vs. 20.2 percent, said ProShares in the statement.

At a time when income investors are concerned about the effects of rising interest rates on bond proxy sectors, such as telecom and utilities, and the spate of negative dividend actions seen last year in the energy sector, NOBL is an attractive idea among dividend ETFs. NOBL's combined weight to the energy, telecom and utilities sectors is just 8 percent, according to ProShares data.

That is not even a third of the 26.4 percent the ETF devotes to consumer staples stocks. Industrial and healthcare names combine for another 29.4 percent of NOBL's weight. NOBL's lineup features eight members of the Dow Jones Industrial Average, including:

  • Wal-Mart Stores, Inc. (WMT)
  • The Coca-Cola Co (KO)
  • Exxon Mobil Corporation (XOM)
  • Johnson & Johnson (JNJ)

Investors are attracted to NOBL because the Dividend Aristocrats are quality companies with long-term return potential, said Michael L. Sapir, co-founder and CEO of ProShare Advisors LLC, in the statement.

Indeed, since its inception, NOBLs index has outperformed the S&P 500 with lower volatility.

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