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NOBL: The Best Dividend ETF for 2020

NOBL: The Best Dividend ETF for 2020
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By Wednesday, 05 February 2020 06:15 PM Current | Bio | Archive

Income investors, such as retirees, should consider high-quality dividend stocks for retirement.

Even with interest rates on the decline again, investors with a desire for cash flow can find many attractive stocks among the Dividend Aristocrats. These are companies within the S&P 500 Index that have raised their dividends for at least 25 consecutive years.

Purchasing individual stocks requires investors do their homework, since each company has its own set of unique risk factors. But for investors looking to simplify the process, dividend exchange-traded funds (otherwise known as ETFs) are a suitable alternative. We believe the ProShares S&P 500 Dividend Aristocrats ETF (NOBL) is the best dividend ETF for income investors.

Overview of Dividend ETFs

Exchange-traded funds are appealing for investors who prefer to instantly diversify their portfolios. ETFs offer investors the opportunity to purchase a basket of stocks all at once. Investors previously had the option to pursue diversification through mutual funds. But the onset of ETF investing in the past decade has shaken up the asset management industry. This is because ETFs widely offer lower annual fees than traditional mutual funds.

Indeed, NOBL has an expense ratio of 0.35%. Many mutual funds carry significantly higher expense ratios—some exceed 1% annually. High expense ratios can meaningfully erode investor returns over long periods of time, which helps explain the rising popularity of ETFs. Separately, ETFs also offer greater liquidity than traditional mutual funds. That is because ETFs are traded throughout the day, just like individual stocks, whereas mutual funds are priced only once, after the market close.

Why NOBL Is the Top Dividend ETF

NOBL is the only ETF that specifically tracks the Dividend Aristocrats. We believe the Dividend Aristocrats are among the strongest stocks for long-term dividend growth investors, making NOBL a naturally appealing choice.

NOBL has outperformed the broader market over the past several years. For example, in the past 5 years through September 2019, NOBL generated total annual returns of 11.3%, compared with 10.8% annual returns for the S&P 500 Index. NOBL outperformed the broader market by 0.5% per year annually, indicating strong outperformance for the Dividend Aristocrats.

And, NOBL offers investors a significantly higher level of dividend income than the broader S&P 500. While the S&P 500 Index has an average dividend yield of just 1.75%. This is due to the nearly uninterrupted 10-year bull run of the U.S. stock market. But it presents a fairly disappointing level of income for investors who desire income. NOBL is a better choice relative to the broader index, as NOBL has a current dividend yield of approximately 2.5%.

Finally, NOBL is also a better choice for value investors, especially those who feel the U.S. market has become overvalued. The S&P 500 Index as a whole now trades for a price-to-earnings ratio of 25; NOBL’s holdings have an average P/E ratio of 18.5. This is partly due to the large exposure of the S&P 500 Index to the technology sector, while the Dividend Aristocrats are relatively under-exposed to tech stocks.

Final Thoughts

Falling interest rates have put income investors in a difficult position. And with the S&P 500 Index sitting near record highs, finding quality dividend stocks with high yields and reasonable valuations has become much more challenging in recent years. But there are many strong dividend stocks that are not excessively valued, such as the Dividend Aristocrats.

Investors can find many individual bargains among the Dividend Aristocrats, or can hold all of them at once through ETFs. We view NOBL as the top dividend ETF for income investors.

Ben Reynolds is CEO of Sure Dividend. Sure Dividend helps individual investors build high quality dividend growth stock portfolios for the long run.

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BenReynolds
Income investors, such as retirees, should consider high-quality dividend stocks for retirement.
best, dividend, etf, 2020
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2020-15-05
Wednesday, 05 February 2020 06:15 PM
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