S&P 500 Dividend Aristocrats: Reliably Growing Dividends

Some of these dividend aristocrats offer yields above 3%. Interested?

Apr 10, 2014 at 4:46PM

Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you'd like to add some solid dividend-paying and dividend-increasing stocks to your portfolio but don't have the time or expertise to hand-pick a few, the ProShares S&P 500 Aristocrats ETF (NYSEMKT:NOBL) could save you a lot of trouble. Instead of trying to figure out which stocks will perform best, you can use this Dividend Aristocrats ETF to invest in lots of them simultaneously.

The basics
ETFs often sport lower expense ratios than their mutual fund cousins. This ETF, focused on Dividend Aristocrats in the S&P 500, sports a relatively low expense ratio -- an annual fee -- of 0.35%. The fund is fairly small, too, so if you're thinking of buying, beware of possibly large spreads between its bid and ask prices. Consider using a limit order if you want to buy in.

This Dividend Aristocrats ETF is too young to have a sufficient track record to assess. As with most investments, of course, we can't expect outstanding performances in every quarter or year. Investors with conviction need to wait for their holdings to deliver.

Why dividend aristocrats?
The power of dividends is often underappreciated and worth putting to work in your portfolio. Companies deemed "Dividend Aristocrats" have hiked their dividends each year for at least 25 years. They're a promising bunch of companies, but they do vary in their appeal, as some may not have big yields or may not be increasing their payouts significantly.

More than a handful of Dividend Aristocrats had strong performances over the past year. Walgreen Co. (NASDAQ:WBA), for example, surged 39% and yields 1.9%. Its payout has been growing aggressively, with an average annual increase topping 20%. Its last quarter was solid, with higher sales making up for lower traffic. The company announced plans to close some locations, but it will be opening more, making a net gain. Walgreen has also been taking some Medicare Part D market share from rival CVS Caremark.

AbbVie (NYSE:ABBV) jumped 20%. Split off from Abbott Laboratories and focusing on pharmaceuticals, AbbVie yields 3.2%. Its blockbuster rheumatoid arthritis drug Humira contributes a huge chunk of revenue (its $10.7 billion in 2013 was 56% of AbbVie's total revenue) and faces patent expiration in 2016, but it's being tested for additional indications and still holds much potential. Bulls are optimistic about its pipeline, which includes treatments for Hepatitis C, among other things.

Sherwin-Williams Company (NYSE:SHW) gained 17% and yields 1.1%. The paint giant had hoped to expand in Latin America via a purchase of the paint operations of Mexico's largest paint-supplier, but that deal recently fell through. The stock's price seems appealing, with a forward price-to-earnings (P/E) ratio near 13, well below the five-year average of 21.5. Sherwin-Williams reports its first-quarter results on April 17. Its fourth quarter featured revenue up 11% over year-ago levels, in part due to acquisitions, though earnings came in below expectations. It's poised to benefit from the recovering housing market, but it faces competition, too.

Other Dividend Aristocrats didn't do quite so well over the last year but could see their fortunes change in the coming years. Procter & Gamble Company (NYSE:PG) advanced just 6% and yields 3%. The company has been struggling in recent years and brought back its former CEO to try and boost performance. The company just announced plans to sell most of its pet food business to Mars for $2.9 billion as it restructures, focusing on its core businesses. Two months ago it announced plans to sell its bleach business, too. Procter & Gamble's second quarter was solid, with 3% organic revenue growth and efficiency improvements. Its forward P/E above 17 makes the stock seem far from a screaming bargain, but it's a consumer brands powerhouse that's likely to keep growing steadily.

The big picture
If you're interested in adding some Dividend Aristocrats to your portfolio, consider doing so via an ETF. A well-chosen ETF can grant you instant diversification across any industry or group of companies -- and make investing in and profiting from it that much easier.

The 9-Minute Dividend Strategy You Need to Know
One of the dirty secrets that few finance professionals will openly admit is the fact that dividend stocks as a group handily outperform their non-dividend paying brethren. With this in mind, our top income analyst put together a report outlining a simple 9-minutes-a-year dividend strategy that should be in every income investor's toolkit. To learn more about this "tax-skipping" dividend trick, all you have to do is click here now.

Selena Maranjian, whom you can follow on Twitter, owns shares of Procter & Gamble. The Motley Fool recommends CVS Caremark, Procter & Gamble, and Sherwin-Williams. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers