NOBL: Dividend Aristocrats Are Riskier Than Ever

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Dividend investing has evolved; traditional approaches may no longer yield high returns due to market changes and algorithmic trading.NOBL's 2% yield is unattractive compared to alternatives, and its ...

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}\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nNOBL: Dividend Aristocrats Are Riskier Than Ever\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-11-21 21:03 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4739273-nobl-dividend-aristocrats-are-riskier-than-ever><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Dividend investing has evolved; traditional approaches may no longer yield high returns due to market changes and algorithmic trading.NOBL's 2% yield is unattractive compared to alternatives, and its ...</p>\n\n<a href=\"https://seekingalpha.com/article/4739273-nobl-dividend-aristocrats-are-riskier-than-ever\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BK4588","symbol_name":"碎股","start_time":0,"source_url":"https://seekingalpha.com/article/4739273-nobl-dividend-aristocrats-are-riskier-than-ever","article_id":"2485496832","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1854863653/image_1854863653.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2485496832","pubTimestamp":1732194207,"columns":[],"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Company quality only gets us so far. And with several popular stocks having been dismissed from the aristocrats' private club when they suspended dividends or simply eliminated them, the pool could b","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4588":"碎股","BK4585":"ETF&股票定投概念","NOBL":"ProShares S&P 500 Aristocrats ETF"},"translate_title":"NOBL：股息贵族的风险比以往任何时候都高","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"NOBL":0.9},"content_text":"Dividend investing has evolved; traditional approaches may no longer yield high returns due to market changes and algorithmic trading.NOBL's 2% yield is unattractive compared to alternatives, and its equal weighting doesn't mitigate the low yield issue.Quality dividend stocks are still valuable, but investors must be tactical and flexible in portfolio management.Consider blending higher-yield ETFs and alternative investments to achieve better returns in the current market environment.SeventyFour/iStock via Getty Images  The ProShares S&P 500 Dividend Aristocrats ETF (BATS:NOBL) has had a fine run. The concept of owning, via an ETF, a basket of stocks which are defined as U.S. companies that have raised their dividend payout per share for at least 40 years. As impressive as that is, the bottom line is not the quality of those business (which is clear from being an aristocrat), but the total return the stocks generate. And, while some investors look only over very long periods of time, I think that assuming dividend investing isn't changing VERY quickly in these modern markets is akin to picking up pennies (per share in dividend, if you will) in front of a steamroller. And since there is so much \"sales material\" thrown at dividend and income-driven investors these days, I'll pick apart NOBL using some of its own marketing material from the ETF's website. Note that I don't think the strategy is outright dangerous to investors. Quality stocks that pay dividends are certainly not in the basement in terms of long-term attractiveness. My concerns are more of an indictment of the way dividend investing has already changed, and how I see it continuing to change. This is quite personal to me, not only because I lead a new dividend stock and ETF investing group, Sungarden YARP Portfolio, at Seeking Alpha. It is because that group exists to allow subscribers to follow what I am doing as a semi-retired self-directed investor, after 30+ years of investing money for clients and fund shareholders in my \"past life.\" I used to manage income and growth portfolios for others, now I do it for myself. Back then, a lot of traditional approaches like this one had an outlook similar to their history: it was encouraging. But then algorithmic trading came along, earnings announcements became \"events\" and meme stocks and the like rendered dividend stocks as marketing tools. All this means that as dividend and income investors, we need to dig a bit deeper to identify stocks, and we need to be flexible in how we weight them in the portfolio over time. Otherwise, any stock can be a train wreck, even a high-quality aristocrat. Here's exhibit 1, if you will, from ProShares NOBL material. ProShares Stability: great! Dividend growth: great! History of weathering market turbulence: no! Company quality only gets us so far. And with several popular stocks having been dismissed from the aristocrats' private club when they suspended dividends or simply eliminated them, the pool could be shrinking. There are still several dozen that meet the requirements, but like most stocks I scout at this point in the market cycle, there are a lot of \"heavy\" looking charts and valuations, and several others that look more like they will tread water. In my single-stock articles and articles covering my personal portfolio, I provide more detail on that. And of course, daily in the investing group. This ETF was a favorite of mine some time ago, since finding quality stocks while reducing exposure to volatile sectors was an attraction point. Again, the companies are still fine in most cases. But I can't retire on good companies if they are set up for potentially miserable returns in the aggregate. That's a mandate for stock selection, and increasingly for me, using alternative routes to pursue what I call \"yield at a reasonable price (YARP)\". That includes some option-driven ETF, T-bill positions, options and a more selective group of stocks, whose position sizes I rotate more frequently than I felt the need to in the past. NOBL is only 5% in the technology sector, so should the market be led down by that group at some point, NOBL should do relatively well. But investors can't eat \"relative returns\" as they say. And this ETF is equal weighted, so no one stock can tank it. That's a positive. Seeking Alpha And, there's just not much yield here. 2% doesn't get me excited. That's below the low end of what I'll take a good look at. And below is a snapshot take of what I look at for stocks and ETFs in terms of the trademarked YARP factor I created a while back. Data by YCharts What do I see? That 2% yield is toward the lower end of its 7-year range. Furthermore, the only time NOBL yielded more than 2.4% was when the pandemic first hit. That yield might have been somewhat attractive with T-bill at nearly 0%, but today there are too many alternatives. This is not a dividend ETF. It is an ETF that owns stocks that pay dividends. The difference is important. If the stocks have upside potential, that's another story. For years, NOBL could fall back on that aspect of its portfolio. I am less confident that will be the case in the next few years. I'm happy to be wrong because this is NOT a guessing game. It is all about RISK MANAGEMENT to me. And managing risk is primarily about what you don't own or own just a small weighting in. This is something I aim to convey to a wide range of investors. So they can learn what I learned over the decades, and managing money through the dot-com bubble, global financial crisis, pandemic, 2022 and a lot more. Leave it to a fund company to deliver the \"risks\" section in extremely small print, eh? But \"market risk\" is higher now, due to a combination of the aforementioned environmental risks (not the air and water and such, but the market environment). And due to valuation. Seeking Alpha Below is a chart of 1-year rolling returns going back about a decade. It has ranged from more than 60% to -25%, with plenty of time near zero. The latest reading, at more than 19%, is typically about where NOBL peaks. Something to keep in mind in a market for \"traditional\" dividend investing that gets tougher by the day. Data by YCharts Another way to look at it, using 3-year rolling periods, is that the returns of NOBL have been steadily dropping toward T-bill rates (SHV owns 3-12 month bills). Investors will require a renewed premium over T-bills in order to compensate them for the risk of owning stocks. Even quality dividend-paying stocks like NOBL owns. I'm not so sure they'll get it any time soon. Because while one can make a case for Magnificent 7 stocks going \"to the moon\" a la the late 1990s and .com stocks, fairly valued and overvalued 2% yielding stocks, no matter high solid the underlying businesses, are, may not be given that much margin for error. Data by YCharts These stocks traditionally were boring but effective. They are still boring, but the jury's out as to whether they will be effective. And below, we're reminded that losses of 15-30% or more from peak to trough happen often enough to make that 2% average yield of little comfort. Data by YCharts 5% yield for dividend aristocrats? Largely past-tense. To bring this all together, I created this table. I had a hunch based on my experience navigating the dividend stock space for a long time. I suspected that a while back, yields on this type of stock were much, much higher. So as shown here, I ran the data to see how many stocks within a similar index, the S&P 500 High Yield Dividend Aristocrats Index, which has about 100 holdings and a long history. I wanted to see how many stocks yielded 5% or more. In this era of stock buybacks and appreciated stocks suppressing yields, I knew there would be just a handful now. And indeed there were 5, and that count has been in single digits since the end of the pandemic crash nearly 5 years ago. # of stocks with dividend yield of at least 5%, by quarter (YCharts) Now, look at the yellow highlights going back further. For the last 15 years, apart from the pandemic's flash crash, very few if any stocks had yields of 5% or more. Not shown, the figures were not very different when I ran it for a 4% or higher yield. But from the late 1990s through 2009, we regularly saw 15 or more of those 100 stocks yielding above 5%. In particular, in the rightmost column, the dot com era, before, during and just after, saw a consistent portion of these \"high yield\" stocks above a 5% dividend. That tells me clearly that dividend investing has indeed changed. NOT that it is ineffective, just that the old rules don't apply like they used to. The problem is that a lot of the investing industry, and the self-directed investors that follow their content, don't realize this. Or, in the case of the former group, they don't want to risk asset flight by showing folks what I showed here. This is a perception issue as much as anything. NOBL: a noble effort, but not as viable as before Every major stock market cycle in the past 60 years has ended the same way: with a 50% decline from the peak, give or take. I don't know when that will be, but that would be the best thing for long-term investors in dividend aristocrats. Why? Remember my mantra: yield at a reasonable price. The yield is too darn low currently, and as shown below, 23x earnings for this basket, which is expected to grow earnings at a 7% annual rate the next 5 years, is too high for me. There's too much that can go wrong. When I do own dividend ETFs, I tend to do so as a renter, not an owner, holding for months, not years. That's been pretty effective for the segment of my portfolio that rotates among a group of high yield ETFs. YCharts And among the 50 stocks I follow, there is a batch from this list. But importantly, I am not buy and hold with them, at least not for now. Chevron (CVX) and T. Rowe Price (TROW) are a pair of 4%+ yielders I'm currently \"renting.\" They are in the low 4's and in the 25 largest holding of NOBL, only one other stock, Franklin Resources (BEN) is that high (5.7%). And that stock has been cut in half the last 4 years. So, what's an aristocrat-lover to do? The choices as I see them: 1. Stick it out and see what happens. But keep in mind that since the start of 2022, the only return over that puny dividend yield has been a recent spurt higher of about 5% this autumn. That's it in 3 years. 2. Get more tactical. The stocks are not the problem. HOLDING the stocks on the expectation that things will work out like they used to, that's the problem. So as I do, create a basket of stocks that would be a consideration to own \"at a price,\" and determine which ones to own and when. I have my methods, as do many investors. Or, they borrow mine. This can apply to ETFs as well. 3. Blend in more ETFs that target higher yields. This has been a growing trend in my portfolio. Not only because of my concerns about a shrinking supply of dividend stock, as expressed here. Also, because the ETF world has been creative in presenting covered call ETFs, other option-infused funds, and parts of the bond market (long and short, as well as short-term) are getting more interesting.  Don't be fooled by the \"dividend aristocrat\" label. It sounds good, and the quality is still there. But at what price does quality no longer take priority? I've already decided.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"analysis","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.3","shortVersion":"4.29.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2485496832"}