Three Reasons to Consider Investing in Dividend Growth Stocks Now

October 06, 2023
STRATEGY Dividend Growers
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1. A History of All-Weather Performance

Despite calmer waters of late, the past two years have witnessed two distinct periods of strong market performance and an extended market drawdown in 2022. Such episodic periods present a challenge for asset allocation, and strategies that can both participate and defend have proven useful for investors. The S&P 500 Dividend Aristocrats have historically delivered most of the S&P 500 gains, with less of its losses, and the last two years have been no different.                       

Two-Year Cumulative Return          

S&P 500 Dividend Aristocrats Index vs. S&P 500

Bar graph shows two-year cumulative return S&P 500 Div Aristocrats Index vs SP500 with S&P 500 Dividend Aristocrats Index at 9.2% and SP500 at 7.2%

Two-Year Returns Volatility

S&P 500 Dividend Aristocrats Index vs S&P 500   

Bar graph shows two-year returns volatilty for SP 500 Dividend Aristocrats Index vs SP500 with SP 500 Dividend Aristocrats Index at 18.6% and SP500 Index at 19.4%

Source: Morningstar, data as of 7/31/23. Index returns are for illustrative purposes only and do not reflect any management fees, transaction costs or expenses. Indexes are unmanaged, and one cannot invest directly in an index. Past performance does not guarantee future results. 
 

Watch a video to learn about ProShares S&P 500 Dividend Aristocrats ETF (NOBL) as a potentially compelling all-weather strategy for today’s unpredictable markets.

2. The S&P 500 Dividend Aristocrats Are “on Sale”

The consistent performance and resilient fundamentals of dividend growth stocks—particularly higher-quality strategies like investing in the S&P 500 Dividend Aristocrats—typically demand a premium valuation. Those same features also tend to resist dramatic underperformance and valuation extremes.  Still, the narrow, tech-driven rally during the first half of 2023 has left the S&P 500 Dividend Aristocrats trading at a roughly 20% discount to its average relative valuation, as measured by price-to-book ratio.

Relative Price-to-Book Ratio of the

S&P 500 Dividend Aristocrats vs. S&P 500

Graph shows the relative price-to-book ratio of SP500 Dividend Aristocrats vs SP500. The S&P 500 Dividend Aristocrats is trading at a roughly 20% discount to its average relative valuation

Source: Bloomberg. Data as of 6/30/23. The "price-to-book ratio" compares a firm's market capitalization to its book value, and it can be used to help identify potentially undervalued companies.
 

3. A Key Time for Equal Weight

The S&P 500 Dividend Aristocrats Index is an equally weighted index. With 66 names, the top five holdings—or any five holdings—represent less than 10% of the value of the index.  Each one of the 66 stocks in the Dividend Aristocrats has the potential to contribute its fair share to performance.  The S&P 500 is perhaps the 500 in name only.  The weight of the “top five” or “magnificent seven” stocks of the S&P 500 may receive the bulk of the headlines, but the fact that the smallest 250 of the 500 stocks represent only 11% of the value of the S&P 500—and thus have minimal impact on performance—can pose a challenge to diversification and risk management as well.

Top Five Stocks Weighting Through July 2023

Bar graph of the top five stocks weighting through July 2023 with SP500 Dividend Aristocrats at 9% and SP500 at 22%

S&P 500 Stock Weightings Through July 2023

Bar graph shows S&P 500 stock weightings through July 2023 with the top 30 stocks at 47% and the bottom 250 stocks at 11%

Source: FactSet, data as of 7/31/23. 
 
 

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NOBL

S&P 500 Dividend Aristocrats ETF

Seeks investment results, before fees and expenses, that track the performance of the S&P 500® Dividend Aristocrats® Index.

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Past performance does not guarantee future results.

This is not intended to be investment advice. Any forward-looking statements herein are based on expectations of ProShare Advisors LLC at this time.

There is no guarantee any ProShares ETF will achieve its investment objective.

Shares of any ETF are generally bought and sold at market price (not NAV) and are not individually redeemed from the fund. Your brokerage commissions will reduce returns.

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