When the market is not performing at its best, many investors look to bonds for their yields but with inflation outpacing interest rates, the stock market can be a better option and dividend ETFs can provide the vehicle for a better return.
There are certain dividend paying companies that go above and beyond, gaining entry into the Dividend Aristocrat Index, a group of 65 members from the S&P 500 that have all raised their dividends for a minimum of 25 years, with some companies doing so for more than 40.
A good way to get access to these companies can be to invest in dividend ETFs which invest only in companies that pay dividends. These ETFs all have different styles in the way they select companies whether it be size, region, the industry they’re in, or their history of dividend returns, and they then compile them all into a categorized basket.
Two dividend ETFs that follow a Dividend Aristocrats Index are:
SPDR S&P Dividend ETF (SDY) – SDY tracks the S&P High Yield Dividend Aristocrats Index which requires it companies to have increased their dividend payments for at least 20 years. Up +5.30% for the past 6 months, SDY has a dividend yield of 2.3% with its top five holdings being: Exxon Mobil (XOM) 2.85%, Chevron Corp. (CVX) 2.38%, International Business Machines (IBM) 2.13%, South Jersey Industries Inc. (SJI) 1.99%, and AbbVie Inc. (ABBV) 1.96%.
ProShares S&P 500 Dividend Aristocrats ETF (NOBL) – NOBL follows the performance of the S&P 500 Dividend Aristocrats Index discussed earlier which only accepts companies with a history of at least 25 years of increased dividends. Compared to SDY, NOBL has a lower dividend yield of 1.9% but opts to make their portfolio balanced giving most of their holdings similarly equal weighting. NOBLs top five holdings are: Nucor Corp. (NUE) 2.37%, Archer Daniels Midland Co. (ADM) 2.00%, Chevron Corp. (CVX) 1.95%, AbbVie Inc. (ABBV) 1.86%, and Atmos Energy Corp. (ATO) 1.78%.