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.
FYI: Another great way to get exposure to the real estate sector is by investing in real estate debt. Groundfloor offers fantastic short-term, high-yield bonds that can add diversification to your portfolio!
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|
|AWR||American States Water||65|
|NWN||Northwest Natural Gas||64|
|PG||Procter & Gamble||63|
|JNJ||Johnson & Johnson||57|
|LANC||Lancaster Colony Corp.||57|
|ITW||Illinois Tool Works||56|
|FRT||Federal Realty Investment TrustREIT||52|
|SWK||Stanley Black & Decker, Inc.||52|
|CWT||California Water Services Group||52|
|BKH||Black Hills Corp||50|
|FUL||H.B. Fuller Co.||50|
|NFG||National Fuel Gas Co.||49|
|LEG||Leggett & Platt||48|
|MSA||Mine Safety Applications||48|
|MSEX||Middlesex Water Co.||47|
|ADP||Automatic Data Processing||45|
|TDS||Telephone & Data Systems||45|
|WBA||Walgreens Boots Alliance, Inc.||44|
|ADM||Archer Daniels Midland Co.||44|
|CTBI||Community Trust Bancorp||39|
|ORI||Old Republic International Corp||38|
|APD||Air Products & Chemicals||37|
|SRCE||First Source Corporation||34|
|UHT||Universal Health Realty Income TrustREIT||34|
|MKC||McCormick & Co.||33|
|THFF||First Financial Corp||33|
|TROW||T. Rowe Price||33|
|WST||West Pharma Services||27|
|CFR||CullenFrost Bankers Inc.||27|
|SKT||Tanger Factory OutletREIT||27|
|ESS||Essex Property TrustREIT||26|
|JW-A||John Wiley & Sons||26|
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.
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.
FYI: The best way I've found to invest is through M1 Finance. It's free and you even get an instant line of credit and 100$! Have a look here (link to M1 Finance).
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:
|Index Tracked||S&P 500 Dividend Aristocrats Index|
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.
- All Dividend Aristocrats in one ETF
- Easy to manage
- Quarterly accumulated dividend payments
- 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 😉
NOTE: The easiest way to add diversification to your portfolio is to invest in real estate through Fundrise. You can become private real estate investor without the burden of property management! Check it out here (link to Fundrise).
So, how to invest in Dividend Aristocrats?
Time needed: 1 day.
How To Invest In Dividend Aristocrats
- 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.
- Search for NOBL
Use Robinhood’s search function to look for the ProShares S&P 500® Dividend Aristocrats ETF (NOBL).
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?
Over the past years, I have discovered several tools and products that have helped me tremendously on my path to financial freedom:
P.S.: The links below are affiliate links, which means I receive a small commission at no extra cost to you when you sign up for one of the services. Thank you for your support!
1)Personal Capital is simply the best tool out there to track your net worth and plan for financial freedom. Just their retirement planner alone has become an invaluable tool to keep myself on track financially. Try it out, it's free!
2) Take a look at M1 Finance, my favorite broker. I love how easy it is to invest and maintain my portfolio with them. I can set up automatic transfers, rebalance my portfolio with one click and even borrow up to 35% of my assets at super low interest rates!
3) Fundrise is by far the best way I've found to invest in Real Estate. You can diversify your portfolio by investing in their eREITs or even allocate capital to individual properties (without the hassle of managing tenants!).
4) Groundfloor is another great way to get exposure to the real estate sector by investing in short-term, high-yield real estate debt. Current returns are >10% and you can get started with just $10.
5) If you are interested in startup investing, check out Mainvest. I've started allocating a small amount of assets to invest in and support small businesses. Return targets are between 10-25% and you can start with just $100!
To see all of my most up-to-date recommendations, check out the Recommended Tools section.