With rising geopolitical tensions, major monetary policy shifts, slowing economic growth, an overvalued stock market, a choppy job market, and elevated inflation, these are uncertain times for investors. It has lowered investors' appetite for risk and increased their desire for safer investments, particularly dividend stocks and ETFs.
Dividend ETFs generally invest in stocks of large, stable companies that can be relied on to produce consistent income and solid returns through most market environments.
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There may be no more stable dividend ETF than the ProShares S&P 500 Dividend Aristocrats ETF (NOBL 1.14%). It's all right there in the name -- it invests in large-cap stocks that have increased their dividends for at least 25 years in a row, or more. It doesn't get much more stable than that.
It can certainly provide steady dividend income, but can it make you a millionaire at retirement?
Built for these times
The ProShares S&P 500 Dividend Aristocrats ETF is the only one that invests solely in the Dividend Aristocrats® (the term Dividend Aristocrats is a registered trademark of Standard & Poor’s Financial Services LLC). As of Feb. 1, the ETF held about 69 stocks, all of which had increased their dividend for at least 25 years in a row. The average consecutive years of dividend growth were 43 years.
The ETF is equal-weighted, meaning all 69 of the stocks have roughly the same weight in the portfolio. Some of the longest dividend payers include Coca-Cola at 63 years, Target at 54 years, and S&P Global at 52 years -- all Dividend Kings, or companies that have raised their dividends for 50 years or more.
NYSEMKT: NOBL
Key Data Points
This ETF is specifically designed for investors who are looking to balance out their portfolio with an all-weather, risk-averse fund that beats the market during difficult periods. For example, the NOBL ETF has an 8% total return year to date with the dividend reinvested, compared to the S&P 500 (^GSPC 1.52%), which is basically flat YTD.
Its longer-term returns, however, fall short of the large-cap benchmark. Over the past five years, NOBL has had an average annualized total return of 9.1% compared to 14.4% for the S&P 500. Over the past 10 years, NOBL has had an average total return of 10.6% compared to 15.1% for the S&P 500.
Could a $2,000 investment make you a millionaire?
An investment in the ProShares S&P 500 Dividend Aristocrats ETF is smart in any market because it adds needed balance and stability to a portfolio. And in a volatile market, it becomes even more valuable.
But it should stand alongside other investments, including perhaps an S&P 500 ETF or a Nasdaq-100 ETF, and others that can provide some alpha. A diversified mix of growth and value, as well as dividend and sector-specific ETFs or stocks, can help you maximize returns and minimize volatility.
If you started with a $2,000 investment in NOBL, you would have to contribute $200 a month for 35 years to generate $1 million. It is certainly doable, but that's based on an average total return of 10.6%, which is what NOBL has returned over the past 10 years.
A better strategy would be to make it a component of a larger, more diversified portfolio that helps you weather storms.
