Investing in Dividend Aristocrats ETFs around the Globe

Published Sat, 19 Oct 2013 09:00 CET

According to asset manager BlackRock’s citing of a Société Générale study, “dividend growth was the single largest contributor to nominal returns across key developed markets over the past 40 years.” Additional research suggests that dividend growth resulting in higher dividend yields may produce higher annual compound returns with lower risk. All this is relevant for income investors seeking consistent dividend increases over time that can help preserve the long-term purchasing power of investments against inflation and, with reinvested dividends, can generate a compounding effect that could significantly bolster long-term total returns.

A selected group of mostly blue-chip dividend-paying companies, termed “Dividend Aristocrats”, boasts an impeccable record of long-term dividend growth. These companies have followed a consistent policy of raising their dividends at least once a year for an extended period of time. Their ability to do so for long periods testifies to their earnings power and growth capacity, as well as to their focus on consistent shareholder-friendly capital allocation strategies. What’s more, in some cases, the group has outperformed the broad market indices over longer-term investment horizons.

Dividend investors have plenty of options when pursuing dividend-growth stock; however, instead of investing in individual Dividend Aristocrats stocks, they have an option to purchase inexpensive exchange-traded products comprising of all Dividend Aristocrats from specific geographic markets, either global, regional, or national. This option clearly allows for diversification across companies and industries, reducing the risk. Among the available exchange-traded funds (ETFs) focused on Dividend Aristocrats across various geographical markets, the following few stand out:

SPDR S&P Global Dividend ETF (NYSE: WDIV)
SPDR S&P Dividend ETF (NYSE: SDY)
ProShares S&P 500 Aristocrats ETF (NYSE: NOBL)
iShares S&P/TSX Canadian Dividend Aristocrats ETF (TSX: CDZ)
SPDR S&P UK Dividend Aristocrats UCITS ETF (LSE: UKDV)
SPDR S&P Euro Dividend Aristocrats UCITS ETF (LSE: EUDV)
SPDR S&P Pan Asia Dividend Aristocrats UCITS ETF [LSE: ASDV (USD) / PADV (GBP)][Xetra: ZPRA (EUR)]

The SPDR S&P Global Dividend ETF, with an inception date of May 29, 2013, attempts to replicate the performance of the S&P Global Dividend Aristocrats Index, which is comprised of the global high dividend yield companies within the S&P Global Broad Market Index (BMI) with a policy of increasing or stable dividends for at least 10 consecutive years. The ETF consists of 101 stocks, has largest weights allocated to industrials, utilities, and financials, and assigns nearly half the fund’s weighting to stocks from United States, Canada, and United Kingdom. The ETF, categorized into the large-cap value category, makes quarterly distributions, yields 3.29% (based on the 30-day SEC yield), and assesses an expense ratio of 0.40%. The fund’s total return, year-to-date and since inception, is 6.61%. The ETF includes the likes of GDF SUEZ (Euronext: GSZ), AstraZeneca (LSE: AZN) (NYSE: AZN), and New York Community Bancorp (NYSE: NYCB). A variant of this ETF by State Street Global Advisors (SSgA) trades as SPDR S&P Global Dividend Aristocrats UCITS ETF on the London Stock Exchange and Deutsche Börse (Xetra).

The SPDR S&P Dividend ETF seeks to closely match, before expenses, the returns and characteristics of the S&P High Yield Dividend Aristocrats Index. The Index is designed to measure the performance of the highest dividend-yielding S&P Composite 1500 Index constituents pursuing a policy of consistently raising dividends every year for at least 20 consecutive years. The ETF consists of 85 holdings, has sector weights broadly distributed, with the largest weights in consumer staples and industrials, and is entirely comprised of U.S. stocks making up the S&P Composite 1500 Index. This large-cap value ETF makes quarterly distributions, yields 2.27% (based on the 30-day SEC yield), and charges a total expense ratio of 0.35%. The fund’s total return year-to-date is 20.67% and 7.16%, annualized, since the fund’s inception on November 8, 2005. The fund holdings include AT&T (NYSE: T), AbbVie (NYSE: ABV), and Consolidated Edison (NYSE: ED).

SPDR S&P Dividend ETF Performance Graph

The ProShares S&P 500 Aristocrats ETF, launched on October 10, 2013, is the first fund that invests in the S&P 500 companies with at least 25 consecutive years of annual dividend increases. The fund is designed to closely match the performance of the S&P 500 Dividend Aristocrats Index, an equally-weighted index currently comprised of 54 companies. The Index per se contains at least 40 stocks, with a maximum sector weight capped at 30% of the index weight. In terms of the sector exposure, this ETF is dominated by consumer staples stocks, followed by a smaller concentration in industrials, materials, health care, consumer discretionary, and financial stocks. NOBL, a large blend ETF, makes quarterly distributions –the first is yet to be made– and charges an expense ratio of 0.35%. The index based on which the fund is designed had a dividend yield of 2.56% on September 30, 2013. The index has achieved a total return of 24.74% year-to-date, and 9.74%, annualized, since its inception on May 3, 2005. The fund includes the likes of McDonald’s (NYSE: MCD), Coca-Cola (NYSE: KO), and Wal-Mart (NYSE: WMT).

The iShares S&P/TSX Canadian Dividend Aristocrats ETF, a Canada-listed ETF, tracks the S&P/TSX Canadian Dividend Aristocrats Index, comprising of stocks or income trust listed on the TSX and in the S&P Canada Broad Market Index (BMI) that have at least five consecutive years of annual dividend increases, but can maintain the same dividend for a maximum of two consecutive years within that 5-year period. All stocks must have a minimum C$ 300 million float-adjusted market cap. The ETF comprises of 59 holdings, with largest weights allocated to financials and industrials. The ETF has a distribution yield of 3.42% and a 12-month trailing yield of 3.26%. Its total management expense ratio is 0.66%. CDZ has achieved a total return of 6.18% year-to-date, and 6.32%, annualized, since inception. The fund’s largest holdings include A.G.F. Management CL B (TSX: AGF.B), AG Growth International (TSX: AFN), and Bird Construction (TSX: BDT). The fund makes monthly distributions.

The SPDR S&P UK Dividend Aristocrats ETF is designed to track the performance of the S&P UK High Yield Dividend Aristocrats Index, which comprises of the 30 highest dividend-yielding UK stocks within the S&P Europe Broad Market Index (BMI) that have raised or kept stable dividends for at least 10 consecutive years. The ETF is predominantly concentrated in the industrials sector, followed by somewhat lower concentrations in consumer stocks and financials. The ETF has a 12-month distribution yield of 3.73%. UKDV charges a total expense ratio of 0.30% and makes semi-annual distributions. It has achieved a total return of 22.22% year-to-date and 25.25% over the past year. The fund’s top holdings include Balfour Beatty (LSE: BBY), Vodafone (LSE: VOD) (NYSE: VOD), and Carillion (LSE: CLLN).

The SPDR S&P Euro Dividend Aristocrats ETF tracks the performance of the S&P Euro High Yield Dividend Aristocrats Index, comprising of the 40 highest dividend-yielding Eurozone companies within the S&P Europe Broad Market Index (BMI) following a policy of increasing or stable dividends for at least 10 consecutive years. The ETF, currently comprising of 41 stocks, has the highest weights in the industrial, consumer discretionary, and financial sectors, which combined account for nearly 72% of the total fund’s weight. EUDV’s distribution yield was 3.27% at the end of August 2013. The fund has a total expense ratio of 0.30% and makes semi-annual distributions. Its total return year-to-date was 14.66% and its one-year trailing return was 22.16%. The fund’s top holdings include Atlantia (Milan: ATL), Axel Springer (Xetra: SPRX), and Corio (AEX: CORA).

The SPDR S&P Pan Asia Dividend Aristocrats ETF tracks the S&P Pan Asia Dividend Aristocrats Index, which measures the performance of companies within the S&P Pan Asia Broad Market Index (BMI) that have followed a policy of consistently increasing dividends every year for at least seven consecutive years. The fund consists of 46 equities, with the highest portfolio weights in industrials, consumer staples, and health care sectors. Combined, these sectors account for nearly 63% of the total fund’s weight. The fund has a total expense ratio of 0.55% and makes semi-annual distributions. The index distribution yield was 3.1% on April 30, 2013. The ETF’s total return over the past three months was 4.42%, while the index recorded a total return of 8.88% year-to-date. The fund’s holdings include the likes of China Mobile (NYSE: CHL), Woolworths (ASX: WOW), and BHP Billiton (NYSE: BHP) (ASX: BHP).

It should be noted that some of these ETFs are traded at specific international exchanges and are available for residents of specific localities and in specific currencies. Some ETFs are thinly traded, which includes liquidity risk. Past performances are not an indication of any future performance. These ETFs are provided as a basis for further research in dividend-growth focused strategies.

ETF name ISIN Price TER YTD Dividend Freq Ex Div Date Dividend Yield
SPDR S&P UK Dividend Aristocrats UCITS ETF Dividend SPDR S&P UK Dividend Aristocrats UCITS ETF on Bloomberg SPDR S&P UK Dividend Aristocrats UCITS ETF XLON:UKDV GB:UKDV Dividend SPDR S&P UK Dividend Aristocrats UCITS ETF on Reuters SPDR S&P UK Dividend Aristocrats UCITS ETF ETF on Yahoo! Finance IE00B6S2Z822 12 GBP 0.30 4.23Semi-Annual09/19/20166.15
SPDR S&P Euro Dividend Aristocrats UCITS ETF Dividend SPDR S&P Euro Dividend Aristocrats UCITS ETF on Bloomberg SPDR S&P Euro Dividend Aristocrats UCITS ETF XLON:EUDV GB:EUDV Dividend SPDR S&P Euro Dividend Aristocrats UCITS ETF on Reuters SPDR S&P Euro Dividend Aristocrats UCITS ETF ETF on Yahoo! Finance IE00B5M1WJ87 17.14 GBP 0.30 18.06Semi-Annual09/19/20165.74
iShares S&P/TSX Canadian Dividend Aristocrats Index Fund Dividend iShares S&P/TSX Canadian Dividend Aristocrats Index Fund on Bloomberg iShares S&P/TSX Canadian Dividend Aristocrats Index Fund XTSE:CDZ Dividend iShares S&P/TSX Canadian Dividend Aristocrats Index Fund on Reuters iShares S&P/TSX Canadian Dividend Aristocrats Index Fund ETF on Yahoo! Finance CA46433F1062 26.44 CAD 0.66 19.64Monthly11/23/20163.98
SPDR S&P Global Dividend ETF Dividend SPDR S&P Global Dividend ETF on Bloomberg SPDR S&P Global Dividend ETF WDIV WDIV Dividend SPDR S&P Global Dividend ETF on Reuters SPDR S&P Global Dividend ETF ETF on Yahoo! Finance US78463X4593 62.39 USD 0.40 13.37Quarterly09/16/20163.97
SPDR S&P Dividend Dividend SPDR S&P Dividend on Bloomberg SPDR S&P Dividend SDY SDY Dividend SPDR S&P Dividend on Reuters SPDR S&P Dividend ETF on Yahoo! Finance US78464A7634 87.26 USD 0.35 20.75Quarterly09/16/20162.26
ProShares S&P 500 Aristocrats ETF Dividend ProShares S&P 500 Aristocrats ETF on Bloomberg ProShares S&P 500 Aristocrats ETF NOBL NOBL ProShares S&P 500 Aristocrats ETF ETF on Yahoo! Finance US74348A4673 54.68 USD 0.35 12.36Quarterly09/21/20162.00