A Strong Q3 For Dividend ETFs

The July through September period was another solid stretch for dividend exchange-traded funds as investors added $4.5 billion to the asset class. More importantly, payout growth continued a robust upward trajectory in the third quarter.

What To Know

Dividend growth is the name of the game with the ProShares S&P 500 Dividend Aristocrats ETF (CBOE: NOBL). NOBL is the only ETF tracking the S&P 500 Dividend Aristocrats Index, which features a stringent requirement of at least 25 years of dividend increases for admittance.

“According to S&P Dow Jones, there were 426 dividend increases in the third quarter of 2019, down from 460 a year earlier. Meanwhile, this year there were 94 decreases, up from 67,” said Todd Rosenbluth, director of ETF & Mutual Fund Research at CFRA Research, in a note out Monday. “The narrowed dividend breadth highlights the benefits of an ETF’s diversification.”

Why It's Important

Up about 17% year to date, NOBL resides 2.24% below its all-time high. The fund yields just under 2%, implying ample room for continued dividend growth while underscoring NOBL's quality tilt, which steers investors away from high-yielding stocks that could be dividend offenders.

“Investors seeking equity income have a wide array of individual securities to consider. There are 423 issues (84%) within the S&P 500 Index that currently pay a dividend, up from 422 (83.6%) a year earlier,” said Rosenbluth.

NOBL allocates about 45.5% of its combined weight to the consumer staples and industrial sectors. Within the S&P 500, 97% of staples companies pay dividends while that percentage is a still impressive 93% for the cyclical industrials sector.

What's Important

NOBL's third-largest sector allocation is financial services 97% of S&P 500 members from that group are also dividend payers. The group has been one of the leading sources of payout growth in the U.S. during this decade.

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