The ETF landscape includes a wide variety of innovative, intriguing funds that look to meet investor goals. From equities to fixed income, all kinds of strategies offer intriguing spins on areas like income and dividends. For example, ProShares has its suite of Dividend Aristocrat funds that lean on dividends to inform investing decisions. Specifically, those strategies invest in companies that have consistently increased dividends over decades. ProShares leaders answered some questions about the ProShares S&P 500 Dividend Aristocrats ETF (NOBL ) and the ProShares S&P Technology Dividend Aristocrats ETF (TDV ) in a recent Q&A.
See more: Look to NOBL’s Growing Dividends in Volatile Rate Environment
What role do the funds play in a portfolio?
Dividend growth strategies can play multiple roles in a portfolio, including as a core equity allocation for domestic large-, mid-, small-cap & international, as a sector strategy (TDV), as a defensive oriented equity strategy — lower volatility, drawdowns as a component of an equity-income allocation, as a factor strategy — i.e. a means to invest in high quality stocks, and as a retirement income strategy — distributions generally grow at attractive rates over time.
Are investors looking for income or total returns when using Dividend Growth strategies?
ProShares’ Dividend Growth strategies have delivered attractive levels of total returns relative to their “parent” indexes over time (i.e. NOBL relative to the S&P 500). The strategies typically weather market turbulence by capturing most of the upside when markets are rallying, with less of the downside when markets are declining.
A growing income stream has been an important component. NOBL has grown its distributions at a compound annual rate of over 10% since its inception, giving investors an attractive “raise” in their income over time.
How many firms can really claim to have increased dividends over such a long period of time?
Companies that have consistently grown their dividends over extended periods are an exclusive group, as continuously growing a dividend is a difficult milestone to achieve. Currently there are only 69 out of 500 companies in the S&P 500, 66 out of 400 companies in the S&P MidCap 400, and 102 out of (almost) 2000 small cap stocks in the Russell 2000.
To what extent do these funds help diversify away from concentration risk?
ProShares’ Dividend Growth ETFs are equally weighted, meaning each member of the portfolio can meaningfully contribute to performance. The portfolios are rebalanced to equal weight every quarter. Unlike market cap-weighted strategies, where a small number of stocks have recently tended to drive performance, NOBL is well diversified across individual names and sectors.
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