By Philip van Doorn, MarketWatch
Dividend stocks are in a sweet spot, as they bridge the difference between growth and income.
Among dividend stocks, so-called Dividend Aristocrats are considered by some to be the cream of the crop.
Companies with long track records of annual dividend increases, as a group, have performed well over a long period. And some have dividend yields that are high enough to attract income-seeking investors, which may be important in the coming years if the Federal Reserve follows the European Central Bank down the road of incredibly low — or even negative — interest rates.
There are two Dividend Aristocrat indexes.
S&P 500 Dividend Aristocrats
The S&P 500 Dividend Aristocrats Index /zigman2/quotes/210598428/delayed XX:SP50DIV -0.08% is maintained by S&P Dow Jones Indices and is made up of the 57 companies in the S&P 500 /zigman2/quotes/210599714/realtime SPX +2.39% that have increased regular dividends on common shares for at least 25 consecutive years. It makes no difference how high a stock’s current dividend yield is.
You can invest in the entire S&P 500 Dividend Aristocrats group with the ProShares S&P 500 Dividend Aristocrats ETF /zigman2/quotes/208747379/composite NOBL +1.28% .
Here’s how the S&P 500 Dividend Aristocrats Index has performed against the broader S&P 500 over various periods:
|Index||Total return - 2019 through July 23||Total return - 3 years||Total return - 5 years||Total return - 10 years||Total return - 15 years||Total return - 20 years|
|S&P 500 Dividend Aristocrats Index||18%||36%||73%||325%||383%||532%|
In the past five years, with the S&P 500’s performance being weighted toward the FAANG group (Facebook /zigman2/quotes/205064656/composite FB +3.86% , Amazon.com /zigman2/quotes/210331248/composite AMZN +5.73% , Apple /zigman2/quotes/202934861/composite AAPL +3.19% , Netflix /zigman2/quotes/202353025/composite NFLX +7.65% and Google holding company Alphabet /zigman2/quotes/205453964/composite GOOG +2.96% /zigman2/quotes/202490156/composite GOOGL +2.84% ) and other rapidly growing technology companies, the S&P 500 Dividends Aristocrats Index’s return has lagged that of the benchmark. However, the total returns for 10, 15 and 20 years speak for themselves.
The ProShares S&P 500 Dividend Aristocrats ETF was established on Oct. 10, 2013. Here’s a comparison of its long-term performance against the SPDR S&P 500 ETF /zigman2/quotes/209901640/composite SPY +2.39% :
|ETF||Total return - 2019 through July 23||Total return - 3 years||Total return - 5 years||Total return - Oct. 10, 2013, through July 23, 2019|
|ProShares S&P 500 Dividend Aristocrats ETF /zigman2/quotes/208747379/composite NOBL||17%||34%||69%||94%|
|SPDR S&P 500 ETF /zigman2/quotes/209901640/composite SPY||21%||46%||67%||99%|
S&P High-Yield Dividend Aristocrats
S&P Dow Jones Indices also maintains the S&P High-Yield Dividend Aristocrats Index /zigman2/quotes/210599901/delayed XX:SPHYDA +1.16% , which includes the 112 companies in the S&P 1500 Composite Index that have increased their regular dividend payouts for at least 20 straight years. (The S&P 1500 Composite Index is made up of the S&P 500 /zigman2/quotes/210599714/realtime SPX +2.39% , the S&P 400 Mid-Cap Index /zigman2/quotes/219506813/composite MID +5.32% and the S&P Small-Cap 600 Index /zigman2/quotes/210599868/delayed SML +2.40% . So all S&P 500 Dividend Aristocrats are also high-yield Dividend Aristocrats.)
You can invest in the High-Yield Aristocrats as a group with the SPDR S&P Dividend ETF /zigman2/quotes/206871683/composite SDY +1.21% .