A Guide To Dividend Aristocrat ETFs

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Dividend investing remains a popular strategy for investors even in the face of rising yields. Though it does not offer dramatic price appreciation, the strategy is a major source of consistent income for investors in any type of market.

This is especially true as dividend-focused products offer safety in the form of payouts and stability through mature companies that are less volatile to the large swings in stock prices. The dividend-paying securities are major sources of consistent income for investors when returns from equity markets are at risk. Further, these products are proven outperformers over the long term.

While there are plenty of options in the dividend ETF world, honing in on the dividend aristocrats could be the most beneficial way in the current market environment.

Why Dividend Aristocrats?

Dividend aristocrats are blue-chip dividend-paying companies with a long history of increasing dividend payments year over year. These generally act as a hedge against economic uncertainty and provide downside protection by offering outsized payouts or sizable yields on a regular basis. Additionally, aristocrats tend to skew the portfolio to less volatile sectors and mature companies.

Additionally, these stocks have superior fundamentals that make dividend growth a quality and promising investment for the long term. These include a sustainable business model, a long track of profitability, rising cash flows, good liquidity, a strong balance sheet, and some value characteristics. Further, a history of strong dividend growth indicates that dividend increase is likely in the future.

Investors should note that the dividend aristocrat funds offer more dividend growth opportunities compared to the other products in the space but might not necessarily have the highest yields. Further, these products lead to a healthy portfolio with a greater scope of capital appreciation as opposed to the simple dividend-paying stocks or those with high yields.

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