Experienced dividend investors may know about the S&P 500 Dividend Aristocrats® index, which is a basket of S&P 500 member firms that have boosted payouts for a minimum of 25 straight years. That index is accessible in fund form, meaning that income seekers can efficiently tap into a basket of stocks with steadily rising payouts. (Dividend Aristocrats® is a registered trademark of Standard & Poor's Financial Services LLC.)
What many dividend investors may not know is that aristocracy isn't confined to the large-cap S&P 500. Some mid-cap exchange-traded funds (ETFs) are dividend-dedicated, too, including the ProShares S&P MidCap 400 Dividend Aristocrats® ETF (REGL 0.71%).
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In quiet fashion, which is par for the course in the mid-cap universe, this ProShares ETF is going about its business, beating the S&P MidCap 400 index by 200 basis points year to date. That could be the start of something more substantial, indicating the fund deserves more attention.
How REGL delivers the dividend goods
This $1.8 billion ETF turned 11 years old earlier this month, so it's been around the block. In terms of how its income stream is sourced, it's almost a chip off the old block of its large-cap counterpart. The mid-cap fund follows the S&P MidCap 400 Dividend Aristocrats® index.
Admittedly, the barrier to entry for that gauge is lower than for the equivalent S&P 500 gauge, as the Mid-Cap Aristocrats Index requires a minimum dividend-increase streak of 15 years. Regardless of market capitalization, that's a high hurdle for any company to clear, particularly when moving outside the large-cap realm.
As a result, the ProShares ETF is home to just 51 stocks, giving it an aura of exclusivity. The good news is the portfolio isn't heavily concentrated, as the fund employs an equal-weight methodology, ensuring no individual component exceeds 1.67%.
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Key Data Points
In addition to limited single-stock risk and the dividend stream, this ETF is suitable for long-term buy-and-hold investors because mid-caps have historically outperformed both their larger and smaller peers while being less volatile than small-cap stocks.
An ETF right for these times
Given that it is a dividend growth fund, investors should take a long-term view of this ETF. After all, allowing those payouts to compound over time can yield positive outcomes for patient market participants. None of that diminishes the near- to medium-term appeal of this fund.
Remembering that domestic economic rhetoric can turn on a dime and global geopolitical unrest is always a possibility, the mid-cap dividend ETF is appealing because its holdings generate more than 80% of their sales in the U.S. So if the White House wants to bang the tariff drum again, mid-cap dividend payers may hold up better than their more export-driven larger peers.
And if the U.S. economy takes a turn for the worse, which hopefully won't happen, remember the message sent by management teams that raise dividends during such periods. They're signaling confidence in the business and the ability to grow sales and profits.
The mid-cap dividend ETF charges 0.40% per year, or $40 on a $10,000 stake, to access those benefits.
