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The fourth quarter of 2018 was undeniably horrible for U.S. fairness markets. Beneath stress from politics, earnings and rates of interest, markets pulled again, obliterating their year-to-date positive factors. However a bunch of corporations with a easy but distinctive mark of high quality—the longest monitor information of constant dividend development—fared much better than their friends.
The S&P 500 Dividend Aristocrats—High quality that Can Endure
To raised perceive the form of corporations we’re speaking about, let’s have a look at considered one of a number of broadly identified dividend development indexes. The S&P 500® Dividend Aristocrats® Index focuses completely on a choose group of large-cap corporations throughout the S&P 500—those who have grown their dividends constantly, yearly, for a minimum of 25 consecutive years.
The constituents of the S&P 500 Dividend Aristocrats show traits which can be typical of high quality corporations, akin to secure information of revenue and development. Many, as you may anticipate, are family names—Coca-Cola, Johnson & Johnson, Sherwin-Williams, McDonald’s—they usually have prospered yr after yr, elevating their dividends via a long time of financial cycles, political pressures and adjustments in client developments. Whereas 25 years of dividend development is the minimal level of entry, about half of the 57 corporations within the index have grown their dividends for greater than 40 years and practically a fifth have seen half a century of dividend development.
Firms with 50+ Years Dividend Progress
As of December 31, 2018
Supply: S&P Dow Jones Indices, Bloomberg. These returns don’t signify index efficiency.
Resilience In the course of the This fall 2018 Downturn—High quality Drove Outcomes Throughout Lessons
Dividend development methods, just like the Dividend Aristocrats, confirmed their price in the course of the current U.S. fairness market turbulence within the fourth quarter of 2018. Whereas the S&P 500® declined greater than 13% in the course of the three-month interval from October 1, 2018 via December 31, 2018, the S&P 500 Dividend Aristocrats Index misplaced considerably much less, simply eight.63%.
And that wasn’t restricted to the large-cap asset class. It additionally utilized to dividend development methods in U.S. mid caps, measured by the S&P MidCap 400 Index versus the S&P MidCap 400 Dividend Aristocrats, and small caps, evaluating the Russell 2000 Index versus the Russell 2000 Dividend Progress Index.
Outperformance of Dividend Growers Throughout Asset Lessons
October 1, 2018 – December 31, 2018
Supply: Bloomberg. Index efficiency returns don’t replicate any administration charges, transaction prices or bills. Indexes are unmanaged, and one
can not spend money on an index.
Outperformance Potential Over Time: The Lengthy-Time period Significance of High quality
Simply as importantly, if we have a look at the indexes since inception, the S&P 500 Dividend Aristocrats Index has captured most—practically 92%—of the market’s positive factors over time, whereas experiencing simply 75% of the losses. The up/down seize ratio, as this relationship is thought, is powerful for mid-cap and small-cap U.S. equities too.
Sturdy Up/Down Seize Ratios
Index inception – December 31, 2018
Supply: Morningstar. “Up seize ratio” measures the efficiency of a fund or index relative to a benchmark when that benchmark has risen. Likewise, “down seize ratio” measures efficiency during times when the benchmark has declined. Ratios are calculated by dividing month-to-month returns for the fund’s index by the month-to-month returns of the first index in the course of the acknowledged time interval and multiplying that issue by 100.
How Can This Profit Traders?
The extra unsure the markets, the extra traders might wish to take into account incorporating a dividend development technique into their portfolios. Why? Traditionally, corporations which have grown their dividends have outperformed, with decrease volatility, over time. Dividend development alternate traded funds (ETFs) current a chance for traders taken with including high-quality corporations to their portfolios with the transparency, cost-effectiveness and tax effectivity of an ETF. ProShares provides the one ETF monitoring the S&P 500 Dividend Aristocrats Index, in addition to ETFs masking quite a lot of home and worldwide market caps.
Go to ProShares.com to obtain a duplicate of this report, see present fund efficiency, and be taught extra about dividend development ETFs.
Any forward-looking statements herein are primarily based on expectations of ProShare Advisors, LLC right now. Whether or not or not precise outcomes and developments will conform to ProShare Advisors, LLC’s expectations and predictions, nevertheless, is topic to quite a lot of dangers and uncertainties, together with common financial, market and enterprise situations, adjustments in legal guidelines or rules or different actions made by governmental authorities or regulatory our bodies, and different world financial and political developments. ProShare Advisors, LLC undertakes no responsibility to replace or revise any forward-looking statements, whether or not because of new data, future occasions or in any other case.
This data isn’t meant to be funding recommendation. There is no such thing as a assure dividends will likely be paid. Firms might cut back or remove dividend at any time, and those who do will likely be dropped from the indexes at reconstitution. ETF shares are purchased and offered at market value (not NAV) and aren’t individually redeemed from the fund. Market value returns are primarily based upon the midpoint of the bid/ask unfold at four:00 p.m. ET (when NAV is often decided for many funds) and don’t signify the returns you’ll obtain in case you traded shares at different instances. Brokerage commissions will cut back returns. Present efficiency could also be decrease or increased than the efficiency quoted. For standardized returns and efficiency information present to the latest month finish, see Efficiency.
Investing entails danger, together with the doable lack of principal. These ProShares ETFs are diversified and entail sure dangers, together with imperfect benchmark correlation and market value variance, which will lower efficiency. Investments in smaller corporations usually exhibit increased volatility. Smaller firm shares additionally might commerce at higher spreads or decrease buying and selling volumes, and could also be much less liquid than shares of bigger corporations. Worldwide investments might contain dangers from: geographic focus, variations in valuation and valuation instances, unfavorable fluctuations in foreign money, variations in typically accepted accounting rules, and from financial or political instability. In rising markets, many dangers are heightened, and decrease buying and selling volumes might happen. Please see abstract and full prospectuses for a extra full description of dangers. There is no such thing as a assure any ProShares ETF will obtain its funding goal.
Rigorously take into account the funding goals, dangers, fees and bills of ProShares earlier than investing. This and different data might be discovered of their abstract and full prospectuses. Learn them fastidiously earlier than investing. Receive them out of your monetary advisor or broker-dealer consultant or go to ProShares.com.
The “S&P 500® Dividend Aristocrats® Index” and “S&P MidCap 400® Dividend Aristocrats Index” are merchandise of S&P Dow Jones Indices LLC and its associates. “Russell 2000® Dividend Progress Index” and “Russell®” are logos of Russell Funding Group. All have been licensed to be used by ProShares. “S&P®” is a registered trademark of Commonplace & Poor’s Monetary Providers LLC (“S&P”) and “Dow Jones®” is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”) and have been licensed to be used by S&P Dow Jones Indices LLC and its associates. ProShares haven’t been handed on by these entities and their associates as to their legality or suitability. ProShares primarily based on these indexes aren’t sponsored, endorsed, offered or promoted by these entities and their associates, they usually make no illustration concerning the advisability of investing in ProShares. THESE ENTITIES AND THEIR AFFILIATES MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO PROSHARES.
ProShares are distributed by SEI Investments Distribution Co., which isn’t affiliated with the funds’ advisor.