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In the past, I’ve looked at several dividend growth ETFs, including Proshares’ Dividend Aristocrats ETF (NOBL). NOBL is unique, as it’s the only ETF that directly tracks all the components of the S&P 500 Dividend Aristocrats index – the ETF invests equally in all 50 S&P 500 Dividend Aristocrats. The ETF pays dividends quarterly.
In general, NOBL is not a bad way to invest in the Dividend Aristocrats, especially if you’re not inclined to buy dividend growth stocks individually. Among the advantages of the NOBL ETF are:
– Low Management Fees. While not as low as some of ultra-low cost Vanguard’s completely passive ETFs, NOBL’s annual fee of 0.35% is very low in a world where some specialized ETFs have management fees in excess of 1%. Even with additional costs by buying through a discount broker, the fees are very modest.
– Automatic Diversification. By investing in the NOBL ETF, you get the benefits of spreading your investment over all 50 Dividend Aristocrats. You also get diversification across industries, as the maximum allowable concentration in a single sector is 30%. As of September 30, 2016, Consumer Staples was the largest sector, representing about 27% of the total holdings.
– Low Initial Investment. The minimum investment is limited only by your broker’s minimum account size. In many cases, this may be as little as $2,500 or even $1,000. Some online brokers will let you buy just a single share.
One critical potential downside is that, while NOBL allows you to diversify across many companies and many industries, the ETF focuses on very large (specifically S&P 500) companies.
I looked at the NOBL ETF a couple of years ago for subscribers to my newsletter. At the time, the ETF had decent liquidity, with an average daily volume of around 150,000 shares. Since then, however, the daily volume has nearly doubled to almost 300,000 shares as investors have gone looking for higher yields.
You should be aware that NOBL’s dividends, while they grow year-over-year, do not grow quarter-to-quarter. This is due to a quirk of the quarterly rebalancing and when individual Aristocrats do their annual dividend increase. Here’s a chart since October 2013 (when Proshares created the ETF), and you can see that the dividend fluctuates over the year, but consistently pays the same or higher dividend when comparing the same quarter over multiple years.
The dividend payout of Proshares’ NOBL ETF does not fall when comparing the same quarter across different years.
Summary
With net assets of nearly $2.5 billion (as of September 30, 2016), NOBL has grown rapidly since its inception over the last three years. And with a low management fee and good liquidity, it’s a good option for dividend growth investors looking to easily diversify their investments across more than four dozen large dividend growth companies.