Dividend Growth Portfolio Featured Stock Analysis

The best Dividend Aristocrats ETFs to buy – And which not!

I focus a lot on individual stocks on this blog, because that’s where my passion is. That doesn’t mean that there aren’t any good or even better alternatives. One of the investment options that I have been researching lately is to find out if there are any Dividends Aristocrats ETF that I would like to own.

Therefore I am going to share with you my review of the Dividends Aristocrats ETF’s that I am aware of. I have decided to focus on the following main aspects during my analysis:

  • Dividend Yield
  • Index Composition
  • Accessibility (can we easily buy it in Europe)
  • Valuation (simplified)
  • Management fees

But most and for all: can I count on the ETF paying out growing dividends over time? That’s really what the core of my strategy is as an Dividend Growth Investor and what I’m ultimately looking for.

Without further ado, hereby my review of the following ETF’s followed by my conclusion about the best Dividends Aristocrats ETF.

S&P 500 Dividend Aristocrats ETF
MSCI Europe Dividend Growers ETF
SPDR S&P Dividend ETF
SPDR S&P Euro Dividend Aristocrats UCITS ETF
Vanguard Dividend Appreciation ETF ($VIG)
iShares Core Dividend Growth ETF ($DGRO)

Disclaimer
All data presented in this post is from 26-June-2020. Therefore information upon reading this post may differ from when the post was written. Nevertheless, I believe that the content will be still valid in 6 months after the publication date.


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S&P 500 Dividend Aristocrats ETF

Rating: 3.5 out of 5.

Ticker: NOBL
ISIN: US74348A4673
Distributions: Quarterly
Dividend Yield: 2,34%

Expense Ratio: 0,35%
P/E: 16,9
NAV: 65,45 USD
ETF provider: ProShares

Ths S&P dividend aristocrats index exists since 2013 and it is a composition of at least 40 US companies that have increased their dividends for at least the last 25 years.

It is an equally weighted Dividends Aristocrats ETF and it limits its exposure to any sector to no more than 30%. This is visible in their top 10 holdings because it covers together 17.4% of the portfolio. There’s no position over 2% and there’s no position under 1%. I consider this as pretty well diversified index.

The ETF is trading at an average Price to Earnings of 16,9 and currently yields 2,21%. I find this a relatively low yield compared to other ETF’s and their Expense ratio is 0,35% (Okayish

This is an ETF, so their quarterly payouts are fluctuating, but it’s good to see that the overall trend line is up. The total dividend from 2019 was $1.43, which meant that it was flat compared to 2018 ($1,43). This is very interesting, because you would expect it to grow on a yearly basis. These are dividend aristocrats.

S&P 500 Dividend Aristocrats ETF - Dividend growth
Quarterly dividend payments since inception in Q4 2013

I also like to have a quick look at their top 3 holdings. It’s no exact science, but it does give me a bit of a feeling about the composition of the ETF. It’s a snapshot and it can change overnight, but their current top 3 holdings are:
– Lowe’s Cos Inc
– Carrier Global Corp
– Albemarle Corp

While this ETF has several benefits, it might actually be hard for you to purchase it via your broker over here in Europe. I have tried to look it up with both deGiro and Binck NV. Unfortunately the ETF was not available for purchasing at both brokers.

Pro

✅ A trend of growing dividends
✅ Expense Ratio
✅ P/E Ratio
✅ Diversification
✅ Companies with 25+ years dividend growth

Con

⭕ Accessibility to purchase
⭕ Flat dividend compared to 2018
⭕ Relatively low dividend yield

More info: S&P 500 DIVIDEND ARISTOCRATS ETF


MSCI Europe Dividend Growers ETF

Rating: 1 out of 5.

Ticker: BATS:EUDV
ISIN: US74347B5407
Distributions: Quarterly
Dividend Yield: 2,27%

Expense Ratio: 0,55%
P/E:
NAV: 41,14 USD
ETF provider: ProShares

The MSCI Europe Dividend Growers ETF exists since 2015 and is the EU equivalent of the before-mentioned Dividends Aristocrats ETF. The index is a composition of at least 25 European companies that have increased their dividends for at least 10 years. This means that these companies haven’t necessarily proven to have resilience during a recession as the Great Recession was 12 years ago.

This is also an equally weighted ETF and it limits its exposure to any sector to no more than 30%. There’s no position over 3,5% and there’s no position under 2,5%. It is a smaller ETF compares to the US equivalent, because it “only” consists of 35 holdings. I consider this again to be a very well diversified index.

The ETF is currently trading at an average Price to Earnings of ~19 and it currently yields 2,27%. Again, nothing to get excited about. The performance of the index overall has been very poor. It went literally nowhere since its inception in 2015.

MSCI Europe Dividend Growers ETF - Poor price performance

The same applies to its dividend history. As per the below graph, the trend line has been effectively flat. This is really interesting, because the ETF name suggests to buyers that you may expect to see a growing dividend. This is clearly not the case and the Q1 distribution was just 6.4 cents so that doesn’t bode well for the upcoming distribution in Q2.

MSCI Europe Dividend Growers ETF - Poor dividend growth

Their top 3 holdings are currently:
– Legal & General Group Plc
– St. James’s Place Plc
– Burberry Group Plc

I don’t see a lot of benefits in owning this ETF. While it is an ETF focused on European companies, it seems to be only available in USD. I have also tried to look this one up at both deGiro and Binck NV and unfortunately this ETF was neither available for purchasing at both brokers.

For me this ETF is a perfect example of why you should do your own homework. Morningstar gives it a 4-star rating and this is to many people an indicator that it is “buy-worthy”.

If it looks like a duck, swims like a duck, and quacks like a duck, then it probably is a duck.

Pro

✅ Diversification

Con

⭕ Accessibility to purchase
⭕ No annual dividend growth since inception
⭕ Relatively low dividend yield
⭕ ETF NAV same level as 2015
⭕ Index composed on 10 year dividend growth. Excludes Great Recession
⭕ Trailing Euro Stoxx 50 index by 8%

More info: MSCI Europe Dividend Growers ETF


There are more dividend growth related ETF’s from ProShares, but it would become a very lengthy blog post to discuss them all. However, have a look at the below overview if you are interested in some of their other ETF’s.

ProShares available Dividends Aristocrats ETF s
source: www.proshares.com

SPDR S&P Dividend ETF

Rating: 3 out of 5.

Ticker: SDY / SPYD
ISIN: US78464A7634 / IE00B6YX5D40
Distributions: Quarterly
Dividend Yield: 3,15%

Expense Ratio: 0,35%
P/E: 18.97
NAV: $88,10
ETF Provider: SSGA Funds Management, Inc.

The SPDR S&P Dividend ETF exists since 2005 and it is a composition of US companies that have increased their dividends for at least 20 years. The ETF seeks to also focus on companies that offer both capital growth and dividend income instead of pure yield plays.

The index currently consists of 118 companies and their biggest sectors are Financials and Industrials (both ~18%) while their smallest sector is Information Technology (2.2%). Their top 10 positions in the portfolio cover together 19,35% of the total index. In my opinion the ETF/Index could improve on it’s sector diversification and I would prefer to see more allocation towards the Information Technology, Consumer Staples and the Health Care sector (currently 11,27% and 4,82% respectively).

The ETF is trading at an average Price to Earnings of ~19 and currently yields 3,15% based on trailing twelve months (TTM) distributions. I find this yield quite good compared to other ETF’s and given the current zero-interest environment.

The dividend growth history is not that strong. Only the last two years saw an uptick in dividend growth, because the decade before saw a range bound dividend payout. The total dividend from 2019 was $2,64, which meant a dividend growth of 8,1% compared to 2018 ($2,44).

Dividends Aristocrats ETF - SPDR S&P Dividend ETF - Dividend Growth History

Besides the dividend distributions, the ETF also paid several times a capital gain distribution between 2013 and 2017. I don’t count them as dividends for comparison reasons.

From a price appreciation the story looks much different. As per the below graph, the ETF has seen steady price appreciation since the Great Recession until the stock market crash related to the pandemic.

However, it has been trailing the S&P500 by 60% since the Great Recession in 2007.

SPDR S&P Dividend ETF - Price Appreciation

Having said that, the top 3 holdings in the ETF are currently:
– Exxon Mobil Corporation
– Franklin Resources Inc.
– National Retail Properties Inc.

The good news is that you can buy this ETF via both deGiro and Binck, but under ticker symbol $SPYD (ISIN: IE00B6YX5D40) instead of ticker symbol $SDY. It’s the same ETF, but made available in Euros and it is accessible in most European countries.

Pro

✅ Accessibility to purchase in Europe
✅ Steady capital appreciation
✅ Expense ratio
✅ Dividend yield
✅ Companies -> 20+ years dividend growth

Con

⭕ Poorly diversified
⭕ No real dividend growth from ETF
⭕ Trailing S&P 500 by wide margin

More Info: SPDR S&P Dividend ETF


SPDR® S&P Euro Dividend Aristocrats UCITS ETF (EUR)

Rating: 3 out of 5.

Ticker: SPYW / EUDV
ISIN: IE00B5M1WJ87
Distributions: Bi-Annually
Dividend Yield: 3,68%

Expense Ratio: 0,30%
P/E:
NAV: 19,95 Euro
ETF Provider: SSGA Funds Management, Inc

The SPDR S&P Euro Dividend Aristocrats ETF exists since 2012 and it is a composition of 40 highest-yielding European dividend paying companies that have increased or maintained their dividends for at least 10 years.

The index currently consists of 39 companies and their biggest sectors are Utilities (22%) and Industrials (20,36%) while their smallest sector is Information Technology (0%). Their top 10 positions in the portfolio cover together 44.65% of the total index. In my opinion this ETF/Index could also improve on it’s sector diversification and I would prefer to see more allocation towards the Information Technology, Consumer Staples and the Health Care sector (currently 0%, 3,13% and 7,75% respectively).

The ETF yields 3,68% based on trailing twelve months (TTM) distributions which is high compared to the other ETF’s listed in this blog post.

The dividend growth history is not that strong. The ETF distributes only 8.8% more in annual dividends compared to 2013. As you can see in below graph, the dividend distributions are relatively flat with minor ups and downs during the years.

Dividends Aristocrats ETF - SPDR® S&P Euro Dividend Aristocrats UCITS ETF (EUR) - Dividend History
* dividends are annualized. The fund typically distributes 10% of dividends in March and the other 90% in October

The ETF grew approximately 33% since since inception (2012) until now from a price appreciation point of view. This is definitely not a lot if we take into consideration that we experienced one of the longest bull-markets in history (US perspective).

But to be fair, this is an ETF with European stocks and it outperformed the Euro Stoxx 50 index with ~5%.

SPDR® S&P Euro Dividend Aristocrats UCITS ETF (EUR) - Price performance
SPYW vs Euro Stoxx 50

Having said that, the top 3 holdings in the ETF are currently:
– EDP-Energias de Portugal SA
– Bayer AG
– UPM-Kymmene Oyj

This ETF is also easily purchased via deGiro. Just be careful though, you can purchase it on different stock exchanges in Europe. I would recommend to go to a stock exchange in a country with the most favorable tax rate that applies to you. Either based on the direct tax rate or on the treaty to avoid double taxation your country may have with the other country.

Pro

✅ High Dividend yield
✅ Accessibility to purchase in Europe
✅ Expense ratio
✅ Beats Euro Stoxx 50 on capital appreciation

Con

⭕ Poorly diversified
⭕ No real dividend growth from ETF
⭕ Index composed on 10 year dividend growth. Excludes Great Recession

More Info: SPDR® S&P Euro Dividend Aristocrats UCITS ETF


Vanguard Dividend Appreciation ETF

Rating: 4.5 out of 5.

Ticker: VIG
ISIN: US9219088443
Distributions: Quarterly
Dividend Yield: 1,8%

Expense Ratio: 0,06%
P/E:
NAV: 118.21
ETF Provider: Vanguard

The Vanguard Dividend Appreciation ETF exists since April 2006 and it tracks the Nasdaq US dividend achievers select index. The index focuses on US stocks that have increased their dividends for at least 10 years.

The index currently consists of 225 companies and their biggest sector is Consumer Services (22,8%) followed by Industrials (18,4%) and Healthcare (16.4%). Their smallest sectors are Utilities (4,8%) and Basic Materials (3,1%). This is actually one of the few ETF’s in this review that has a decent allocation to the Technology sector with 11.4%.

Vanguard Dividend Appreciation ETF - sector allocation

Their top 10 positions in the portfolio cover together 35.6% of the total ETF. In my opinion this ETF/Index has a very good sector diversification. I am totally fine with this diversification and aligns quite a bit with my personal allocation strategy. We generally have strong sectors with a higher allocation compared to the slower growth sectors.

The ETF yields “just” 1,8% based on trailing twelve months (TTM) distributions which is on the low end compared to the other ETF’s listed in this blog post. I believe that this is due to the relatively high valuations (P/E ratios) from many of their major positions.

Where this ETF shines is really the dividend growth history. The ETF has a strong dividend growth track record. While it might not have grown the annual dividend every single year, the biggest dividend “cut” was 4.58% in 2009. This was at the depth of the Great Recession which is quite understandable. The year after the dividend distributions grew again with 7.05%.

As you can see in below graph, the dividend distributions have almost tripled since its inception in 2006 and the 10 year growth rate spots 7.37%.

Dividends Aristocrats ETF - Vanguard Dividend Appreciation ETF - Dividend Growth

This ETF has not only performed well from a dividend growth point of view. It also saw a lot of price appreciation in lock-step with the S&P 500. The below graph from Vanguard’s website provides a very good overview of the performance since 2010 in which it has also tripled it’s net asset value.

Having said that, the ETF’s top 3 largest holdings are:
– Walmart
– Microsoft
– Johnson & Johnson

I mean, do I need to say more? These are 3 top-notch companies that deserve a place in every dividend portfolio!

Unfortunately though, this ETF is not easy to purchase for European investors. Vanguard is accessible by investors from certain European countries, but it’s really limited for personal investors to directly purchase via them.

Via deGiro it is neither possible for most Europeans to buy the ETF. The good thing is that some of the other brokers do provide access to this ETF due to its popularity and Binck NV is an example of that.

Pro

✅ Super low expense ratio
✅ Strong 10-yr avg and reliable dividend growth
✅ Good sector diversification
✅ Strong price appreciation, in line with SP500

Con

⭕ Low Dividend yield / High valuation
⭕ Some accessibility issues to purchase in Europe
⭕ Index composed on 10 year dividend growth. Excludes Great Recession

More info: Vanguard Dividend Appreciation ETF


iShares Core Dividend Growth ETF

Rating: 3.5 out of 5.

Ticker: DGRO
ISIN: US46434V6213
Distributions: Quarterly
Dividend Yield: 2.67%

Expense Ratio: 0,08%
P/E: 16.04
NAV: 37.44
ETF Provider: iShares

I decided to include this ETF because I know that many people think that this is a dividends aristocrats ETF, just due to the term “dividend growth” in its name. This is not true though. iShares is not clear at all in their fact-sheet about their strategy regarding dividend growth. All other ETF’s were quite clear about this from the get-go, so I actually believe that they are purposely vague!

iShares mentions the following on their website as an investment objective:

“…ETF seeks to track the investment results of an index composed of U.S. equities with a history of consistently growing dividends

You have to dig a bit deeper in their prospectus though and then you will read that it seeks to track the Morningstar® US Dividend Growth Index. Reading even a bit further again will finally mention that the index screens for a minimum of five years of uninterrupted annual dividend growth and a payout ratio under 75%

This is the reason why I don’t consider this a Dividends Aristocrats ETF. 5 years of consecutive dividend growth is just too little. Anyway, now that we’re at it, let’s look at the ETF a bit deeper to check if could belong in my portfolio 😉


The iShares Core Dividend Growth ETF exists since June 2014 and it is a composition of 421 US based companies. It is by far the largest list of companies in a single ETF as part of this review.

The biggest sectors are Financials (20%), Information Technology (19%) and Health Care (16%) while their smallest sector is Real Estate (0%). Their top 10 positions in the portfolio cover together 26.01% of the total index. In my opinion this ETF/Index is pretty well diversified in some of the better performing sectors, but I would’ve liked to see more exposure to Real Estate. This is probably due to the 75% payout ratio requirement as most REIT’s are required by law to distribute 80% of their earnings.

iShares Core Dividend Growth ETF - Sector distribution

The ETF yields 2,67% based on trailing twelve months (TTM) distributions which is average compared to the other ETF’s listed in this blog post.

The dividend growth history is actually pretty good so far, but we need to remember that this was in one of the biggest bull markets in modern history. Having said that, the dividend distributions grew with an average of 10% in the last 5 years. The last two dividend distributions where flat and I expect at least a decline in the next upcoming quarter due to the Covid-19 pandemic.

iShares Core Dividend Growth ETF - Dividend growth performance

This ETF has not only performed relatively well from a dividend growth point of view. It saw price appreciation in lock-step with the S&P 500, which is no surprise if it is almost the size of the whole S&P 500. The below graph from iShares website provides a very good overview of the performance since 2014 in which it almost doubled its value.

iShares Core Dividend Growth ETF - Price performance

Having said that, the ETF’s top 3 largest holdings are:
– Apple
– Microsoft
– Johnson & Johnson

Together they cover almost 10% of the whole ETF which is quite a lot considering a total of ~450 ETF holdings. Having said that, these are three brilliant companies which I also hold in my personal portfolio as Tier-1 stocks and I’m sure they’ll still be growing their dividends a decade from now.

Unfortunately though, this ETF is not easy to purchase for European investors. I haven’t found it to be available via several of the European iShares sites and neither via deGiro and Binck NV. If you know of brokers that sell this ETF, then please let me know in the comments 👇.

Pro

✅ Very low expense ratio
✅ Strong 5-yr avg and reliable dividend growth
✅ Reasonable sector diversification
✅ Good price appreciation, in line with SP500

Con

⭕ Relatively low Dividend yield / High valuation
⭕ I can’t purchase it from within Europe
⭕ Index composed on just 5 year dividend growth.

More info: iShares Core Dividend Growth ETF


And the best Dividends Aristocrats ETF is…

🏆 Vanguard Dividend Appreciation ETF 🏆

Quality comes at a price, because the starting yield is relatively low. But oh boy, if there’s one ETF that I could ever own in my portfolio then it would definitely be this one.

The track record is suburb and I really like their sector allocation!

Final Thoughts & Conclusion

1️⃣ None of the Dividends Aristocrats ETF ‘s has shown pure year-over-year dividend growth. This was quite a surprise to me, but from the other end it does make sense. As an example, if I wouldn’t have done any monthly contribution to my portfolio this year, then the next quarterly income from dividends would’ve been lower due to the recent dividend cuts from Shell and Disney.

I would probably haven’t been able to replace Shell with another dividend aristocrat at a similar yield compared to what it was before they cut it.

2️⃣ Fun Fact: the best performing ETF’s ($VIG & $DGRO) have the lowest management fees 💪

3️⃣ US aristocrats ETF’s perform better than their European equivalents, but you do get a lower starting yield. If you are in it for the compounding effect then you might be better off with the (EUROPEAN) because the price was relatively stable. If you are seeking price appreciation, then you might just be better of with the US equivalent

4️⃣ Regarding my own portfolio: It’s hard to say if my personal portfolio has beaten any of these ETF’s, because a large effect on my investments is the monthly contribution including the dividend reinvestments. It would be interesting to benchmark this, but it would require me to do quite some data preparation.

I do have a much better current yield though (3,5%) while still having ~7% average dividend growth.

5️⃣ I keep having a preference for individual stock picking. ETF’s are designed to have many companies in there, unrelated to their valuation and future prospects. Therefore there are many stocks in an Dividends Aristocrats ETF which keep the performances of indexes down and which we would likely never own as individual investors. Especially not when using a combination of dividend growth investing and value investing.

Disclosure

I have not reviewed other Dividends Aristocrats ETF ‘s like the Vanguard International Dividend Appreciation ETF. The reason for that is to keep the size of this post consumable and at the same time this ETF only exists since 2016. This is not that long compared to some of the others. The same reasoning applies to iShares International Dividend Growth ETF and Cboe Vest S&P 500® Dividend Aristocrats Target Income ETF.

I do not own any of these ETF’s. I am currently neither considering to purchase any of these.


I hope that you found this review helpful!

I definitely got a better understanding of the value of these ETF’s, so I learnt quite a lot by analyzing that. It also reconfirms to me that I have a preference for individual stock picking. Just out of passion and just out of the value it creates for me.

Yours Truly,

European Dividend Growth Investor

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engodel
engodel
2 months ago

good article again buddy and it highlights one of the many frustrations for European investors. The good and cheap US funds are just to hard to access over here for the retail investor. From a US citizen stand point there is a valid argument that and ETF based strategy should be the main strategy for the average retail investor. For a European citizen the argument is a little more muddy. Tax laws in each country cannot be discounted either as they vary quite vastly. I am also a little surprised with the returns on some you these funds and the… Read more »

Ivan
Ivan
2 months ago

Great article.
Unfortunately from all these ETFs I can invest in SPYD only which is with dividend yield of 1.1%

Jan
Jan
2 months ago

Oh, I just found this ETF: Vanguard International Dividend Appreciation ETF (VIGI). Quite an European angle ETF: 23.20% Emerging Markets, 51.30% Europe, 18.30% Pacific, 0.10% Middle East, 5.60% North America, 1.50% Other. Thank you for a great article! Jan

Tom
Tom
11 days ago

Dividend Aristocrats are great but I prefer direct stocks and no ETF. I love them. That’s why I’ve created a nice monthly updated Excel-table with over 1.000 of the best long-term dividend growth stocks. All Dividend Aristocrats are incluced :-). You find them on my blog. Altria is the top yielding stocks but more important than a high dividend is dividend growth. It’s good to see that there are still enough low debt-loaden Dividend Aristocrats. Thank you for the great article.

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