Income investors can buy individual dividend stocks, but there are good reasons to consider dividend exchange-traded funds as well. This is particularly true for those who do not want to commit the necessary time to perform due diligence when it comes to purchasing individual stocks.

The popularity of ETFs has soared in recent years and is not likely to slow down any time soon due to a number of benefits versus traditional mutual funds. ETFs are far more attractive to own for the long-term than mutual funds. Income investors should consider the number one dividend ETF that invests in the Dividend Aristocrats.

The NOBL Choice For Dividend Investors

Dividend ETFs provide a number of benefits. Compared with buying individual stocks, which come with unique company-specific risks, ETFs are attractive as they provide instant diversification. Buying ETFs allows investors to purchase a basket of stocks at one time. ETFs are also very attractive versus mutual funds, as many ETFs have very low annual fees—much lower than the expenses charged by many mutual funds.

The Dividend Aristocrats represent some of the highest-quality dividend growth stocks. Investors can purchase Dividend Aristocrats individually, or they can invest in the Dividend Aristocrats ETF which trades under the symbol NOBL. This is the major dividend ETF that provides exposure to the Dividend Aristocrats.

NOBL is offered by ProShares, which has over $30 billion of assets. ProShares have benefited from the broad exodus from traditional mutual funds. Over the past several years, investors have gravitated toward ETFs for their lower fees than mutual funds. NOBL has a very reasonable annual expense ratio of 0.35%.

It also has a diversified portfolio of holdings. It holds all of the Dividend Aristocrats. This has led to strong performance over the past several years. In the past 5 years through 9/30/19, NOBL has beaten the S&P 500 Index by approximately 50 basis points per year. Holdings are equally weighted, versus many other ETFs that allocate assets based on a market-cap weighting. The fund methodology is appealing for risk-averse investors, as it lessens the risk of the fund performance being overly reliant on any individual stock.

NOBL’s portfolio includes many stocks that have very long histories of raising their dividends each year. Among its holdings that have over 50 consecutive years of dividend growth include 3M Company (MMM), The Coca-Cola Company (KO), Colgate-Palmolive (CL), and Emerson Electric (EMR). Even better, nearly all of the portfolio holdings have higher dividend yields than the broader market. The average dividend yield of the S&P 500 Index is down to below 2%, due to the record highs of the market in conjunction with falling interest rates.

Investor Takeaway

These kinds of companies are household names that nearly every investor is familiar with. These are companies whose products are purchased by millions of people. Their stability allows them to generate consistent profits and pay steadily rising dividends to shareholders year after year, even during recessions. Income investors looking for reliable dividend payouts throughout market cycles should consider the Dividend Aristocrats.

Investors can purchase individual Dividend Aristocrats, but for those looking for instant diversification benefits, NOBL is the top Dividend ETF