How To Invest In Dividend Aristocrats

How To Invest In Dividend Aristocrats

If you have been as much into dividend investing I have lately you have probably come across the so-called dividend aristocrats. In this post I will look at how to invest in dividend aristocrats. Should you buy each aristocrat individually? Is there a dividend aristocrats ETF? And if so, is it any good?

How To Invest In Dividend Aristocrats? You can invest in Dividend Aristocrats either by buying shares of every company in the Dividend Aristocrat Index individually or by buying the ProShares S&P 500® Dividend Aristocrats ETF (NOBL) ETF which tracks the Dividend Aristocrats Index. In order to invest in Dividend Aristocrats you will need a brokerage account. The one I would recommend for this is Robinhood.

What stocks make up the dividend aristocrats?

First, let’s take a look at what dividends aristocrats actually are and of what stocks they are made up.

The dividend aristocrats are made up of companies that have increased their dividends for at least 25 years. There is no other requirement for companies to be considered a dividend aristocrat.

You can find a fantastic table of all current dividend aristocrats here. These following stocks make up the dividend aristocrats:

Stock Symbol Company Name No. of Years
AWRAmerican States Water65
DOVDover Corp.64
NWNNorthwest Natural Gas64
GPCGenuine Parts63
EMREmerson Electric63
PGProcter & Gamble63
MMM3M61
CINFCincinnati Financial59
JNJJohnson & Johnson57
LANCLancaster Colony Corp.57
LOWLowe’s57
KOCoca-Cola Co.57
CLColgate-Palmolive56
ITWIllinois Tool Works56
CBChubb Limited54
HRLHormel Foods53
TRTootsie Roll53
ABMABM Industries52
FRTFederal Realty Investment TrustREIT52
SCLStepan Co.52
SWKStanley Black & Decker, Inc.52
TGTTarget52
CWTCalifornia Water Services Group52
SJWSJW Corp52
CBSHCommerce Bankshares51
BKHBlack Hills Corp50
FULH.B. Fuller Co.50
NFGNational Fuel Gas Co.49
SYYSysco Corp49
TNCTennant Co.48
BDXBecton Dickinson48
LEGLeggett & Platt48
MSAMine Safety Applications48
UVVUniversal Corp48
GWWW.W.Grainger48
GRCGorman-Rupp47
ABTAbbott Labs47
PPGPPG Industries47
PEPPepsiCo47
VFCV.F. Corporation47
MSEXMiddlesex Water Co.47
ABBVAbbVie Inc.47
HPHelmerich Payne47
KMBKimberly-Clark47
NUENucor Corporation46
ADPAutomatic Data Processing45
TDSTelephone & Data Systems45
EDConsolidated Edison45
RPMRPM International45
WMTWal-Mart Stores45
WBAWalgreens Boots Alliance, Inc.44
MGEEMGE Energy44
ADMArcher Daniels Midland Co.44
PNRPentair Inc.43
CSLCarlisle Co.43
MCDMcDonald’s43
RLIRLI Corp43
CLXClorox Co.42
MDTMedtronic, Inc.42
SHWSherwin Williams41
EVEaton Vance39
CTBICommunity Trust Bancorp39
SONSonoco Products39
BENFranklin Resources38
WEYSWeyco Group38
ORIOld Republic International Corp38
XOMExxon Mobil37
APDAir Products & Chemicals37
ATOAtmos Energy37
CTASCintas Corporation37
AFLAflac37
DCIDonaldson Company35
BF-BBrown-Forman35
TAT&T35
ECLEcolab Inc.34
SRCEFirst Source Corporation34
UGIUGI Corp34
UHTUniversal Health Realty Income TrustREIT34
BRCBrady Corp34
MCYMercury General34
CVXChevron Corp34
TMPTompkins Financial34
MKCMcCormick & Co.33
THFFFirst Financial Corp33
TROWT. Rowe Price33
WSTWest Pharma Services27
CFRCullenFrost Bankers Inc.27
SKTTanger Factory OutletREIT27
ESSEssex Property TrustREIT26
JW-AJohn Wiley & Sons26
EXPDExpeditors International25

This list is sorted by the number of years that companies have increased dividends. The company with the longest history of dividend growth is American States Water with a record of 65 years. The youngest dividend aristocrat is Expeditors International which crossed the 25 year mark just this year.

The keen observer will notice that the industry exposure of this list is not very balanced or even remotely resembles the U.S. stock market in its entirety.

This is because certain sectors have a much higher proclivity to paying out dividends on a regular basis. Their business models and external economic structures allow for sustained dividend growth. Other sectors are comprised mostly fast-moving, growth-focused companies which either have just emerged in recent years or are not set up to increase dividends year by year.

Dividend Aristocrats – Equity Sectors

The above chart illustrates this point quite well: industrials make up almost one quarter of net assets of the dividend aristocrats, closely followed by the consumer defensive sector.

What is the dividend aristocrats index?

All thee companies that are considered dividend aristocrats are tracked by the S&P 500 Dividend Aristocrats Index. This index is primarily made up Standard & Poor’s S&P 500 which is comprised of the 500 largest U.S. companies. Any company which fails to meet the requirement of having increased dividends in 25 consecutive years in then removed from that list.

What you are left with are the 64 companies listed above.

Is there a Dividend Aristocrats ETF?

Now, you might think: if there is an index that tracks all this, surely there must be an ETF that follows that index, right?

Right! In fact there 2 ETFs that follow the S&P 500 Dividend Aristocrats Index:

  • ProShares S&P 500 Dividend Aristocrats (NOBL)
  • Cboe Vest S&P 500® Dividend Aristocrats Target Income ETF (KNG)

Between these two, NOBL is the not only the bigger ETF in terms of assets but also the one that more accurately ONLY tracks the Dividend Aristocrats.

There are also other ETFs which indirectly have a lot of exposure to dividend aristocrats. Among those are:

  • SPDR S&P Global Dividend ETF (WDIV)
  • iShares Select Dividend ETF (DVY)
  • iShares High Dividend ETF (HDV)

However, since NOBL is the only ETF that solely focuses on the dividend aristocrats index I will focus on NOBL.

Is NOBL a good ETF?

If for looking to invest in dividend aristocrats NOBL can be a great option to get exposure to all dividend aristocrat with a single ETF. Here are some key facts:

IssuerProShares
StructureETF
Expense Ratio0.35%
InceptionOctober 2013
Index TrackedS&P 500 Dividend Aristocrats Index
Total Assets$4,761,545

One of the biggest factors I concern myself with when deciding whether an ETF is worth buying is usually the expense ratio. NOBL has an expense ratio of 0.35% which is relatively high compared most other ETFs out there. Compare this to Vanguard’s VTI with an expense ratio of just 0.03%. NOBL’s fee’s are more than 10x those of VTI.

So, is this additional expense worth it or should you just buy the individual stocks?

Investing in NOBL (vs. individual stocks)

Let’s look some of the advantages of investing in NOBL: you’re getting all dividend aristocrats in one ETF. This means less time collecting your own portfolio of individual stocks. You also don’t have to track any changes to the Dividend Aristocrat Index, i.e. when a company stops increasing dividends or a new company crosses the 25 year mark.

Furthermore, putting together a portfolio of 65 stocks and balancing it out by market cap over time can be very costly. Especially if you are not using a discount broker such as Robinhood.

The only con I can really think of with regards to NOBL are the fees. With a $10,000 investment those would add to about $35 per year. As your portfolio grows (as it hopefully does) your fees will grow proportionally.

Pros

  • All Dividend Aristocrats in one ETF
  • Easy to manage
  • Quarterly accumulated dividend payments

Cons

  • 0.35% in annual fees

In my humble opinion, the pros far outweigh the cons when it comes to NOBL. Unless you have plenty of spare time and feel like combing through a list of 65 stocks on a monthly basis I’d say stick with NOBL. And even then, you could probably spend that time better by educating yourself about investing or by reading this blog 😉

Conclusion

So, how to invest in Dividend Aristocrats?

Time needed: 1 day.

How To Invest In Dividend Aristocrats

  1. Open an account with Robinhood

    The first thing you need to do when investing in dividend aristocrats is find a stock brokerage. With Robinhood you can buy ETFs (and common stocks) without commission.

  2. Search for NOBL

    Use Robinhood’s search function to look for the ProShares S&P 500® Dividend Aristocrats ETF (NOBL).

  3. Invest

    Pick the amount you would like to invest in dividend aristocrats and hit “buy”. And you have done it!


What’s your opinion on NOBL? How would you go about investing in Dividend Aristocrats?

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