Is ProShares S&P 500 Dividend Aristocrat ETF (NOBL) The Safest Dividend ETF on the Market?

There are plenty of dividend payers out there, but only some of them qualify as dividend aristocrats, which can loosely be defined as businesses with exemplary track records of paying dividends. Even fewer of those companies have consistently grown their dividend payments — and those firms are the focus of the ProShares S&P 500 Dividend Aristocrat ETF (BATS:NOBL).

Granted, NOBL isn’t the only dividend growth focused exchange traded fund (ETF) available today. In particular, a competing fund from Vanguard, the the Vanguard Dividend Appreciation ETF (NYSEARCA:VIG), may appeal to safety-seeking investors.

Yet, there are specific features of the ProShares S&P 500 Dividend Aristocrat ETF that strongly enhance the fund’s safety profile. So, let’s put NOBL to the test and see how ProShares’ dividend growth centered fund stacks up as an all-weather yield-bearing asset.

NOBL: The Basics

While safety cannot be fully guaranteed with any fund, the ProShares S&P 500 Dividend Aristocrat ETF has advantages that should reassure investors. First of all, as the fund’s name implies, only members of the prestigious S&P 500 large-cap index are considered for inclusion in the fund.

Moreover, this ProShares ETF doesn’t just represent any random group of S&P 500 members. Specifically, the fund tracks the the S&P 500 Dividend Aristocrats Index, which includes S&P 500 members that have consistently grown their dividend distributions for at least 25 consecutive years.

Thus, we’re already discerning a safety aspect of the NOBL ETF. With this fund, you’ll get exposure to large, established, dividend-growing companies like Coca-Cola (NYSE:KO), International Business Machines (NYSE:IBM), Johnson & Johnson (NYSE:JNJ), and Consolidated Edison (NYSE:ED). Folks seeking a relatively safe, yield-bearing ETF during uncertain times can therefore turn to this unique fund from ProShares.

Another advantage of the ProShares S&P 500 Dividend Aristocrat ETF is its cost-efficiency. Sure, the fund’s managers charge an annualized fee, known as an expense ratio, that’s automatically deducted from the share price. However, NOBL’s expense ratio is only 0.35%, which would equate to $0.35 per year for every $100 invested in the fund — not an exorbitant price to pay for a managed fund, you must admit.

Indirectly, having a low expense ratio contributes to a fund’s safety profile. After all, exorbitant fees can substantially deteriorate your portfolio’s value over time. By keeping its expense ratio low, ProShares is making its S&P 500 Dividend Aristocrat ETF an attractive choice for long-term wealth builders.

A “Noble” Group of Dividend Payers

What makes NOBL component businesses like Coca-Cola, Johnson & Johnson, and Consolidated Edison stand out, though? Skeptics might contend that there are plenty of dividend growers out there to choose from.

That’s certainly true, but there’s a reassuring feeling that comes with companies that have increased their dividend payouts for at least 25 years. When it comes to the NOBL ETF, ProShares points out that most of its component businesses have grown their dividend payments for 40 years or longer.

Plus, ProShares states that NOBL’s holdings are “often household names.” This is undeniable; who hasn’t heard of Coca-Cola, IBM, and Johnson & Johnson? Even beyond the brand-name recognition, though, ProShares observes that these companies “generally have had stable earnings, solid fundamentals, and strong histories of profit and growth.”

This helps to explain how investors have practically doubled their money with the NOBL ETF over the past five years — and this doesn’t even include the dividend distributions. When you factor in the dividend yield, which is 2.46% per year, the ProShares S&P 500 Dividend Aristocrat ETF delivers weather-the-storm reliability that safety seekers can count on.

Diversify with Dividend Royalty

In addition, ProShares adds an extra layer of safety to the NOBL ETF through a balanced mix of S&P 500 members across multiple market sectors. That way, the fund’s investors aren’t overexposed to the ups and downs of any single sector.

We can drive this point home by comparing the ProShares S&P 500 Dividend Aristocrat ETF to the seemingly similar Vanguard Dividend Appreciation ETF, also known as the VIG ETF. As I’ve previously pointed out, VIG’s mix of holdings includes 24.1% information technology stocks and 22.7% financial stocks.

Sure, technology stocks can lead the S&P 500 higher, but they can also crash hard during a broad-market downturn. The same can be said, more or less, about financial-sector stocks.

In contrast, the most prominent sectors represented in the NOBL ETF are consumer staples (24.45% weighting in the fund), industrials (22.76%), and materials (11.48%). These market segments tend to hold up comparatively well during times of turbulence. And don’t worry — you’ll also get a reasonable measure of exposure to important sectors like technology, financials, energy, and health care.

The bottom line is that the ProShares S&P 500 Dividend Aristocrat ETF provides proper diversification, emphasizes less volatile market segments, keeps its costs low, and enables exposure to reliable dividend growers. With all of those benefits in one fund, you can align your portfolio with a relatively safe mix of dividend-paying royalty simply by owning NOBL today.

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