Dividend Aristocrat ETF or Dividend Achievement ETF?

In the 70s, buy-n-hold investors in the U.S. didnt experience capital gains for 16 years (1966-1982); they didnt see any cap app for the 10 years (2000-2009) of the last decade either.

Thats why dividend enthusiasts like to remind the easy money crowd that you cant count on prices going higher. However, you may be able to count on cash flow or reinvested dividends from companies that reliably and consistently increase their payouts to shareholders.

As an aside, some dividend-oriented investors maintain the same, tired, you cant time the markets mantra. Ergo stick with dividends. Yet buying-n-holding through bear markets is madness. You dont have to be a market timer to use unemotional stop-losses or to purchase insurance with put options.

It follows that the most sensible approach is to avoid the bulk of the bear damage in seismic sell-offs (e.g. 73-74, 81-82, 00-02, 08-early 09). With an approach for losing less in bad times, you dont need to make as much when the bull bounces off the bears trampoline!

But I digress. I did want discuss the power of what the dividend-happy folks call dividend aristocrats.

Aristocrats are S&P 500 companies that have increased their payouts for 25 consecutive years. Youre not an aristocrat if you miss a single year. Moreover, statisticians suggest that aristocrats have out-muscled the S&P 500 over 5, 10, 15, 20 and 25 years with less beta volatility!

Okay thats good stuff. Yet theres only a single ETF that lets you invest in aristocrat-related ETFs. I say aristocrat-related, because State Street offers the SPDR S&P Dividend Fund  (SDY) that seeks to replicate the price and yield of the S&P High Yield Dividend Aristocrats Index.

In other words, SDY further peels off some of the stocks such that only the 50 highest yielding aristocrats are included. Meanwhile, the spin-off index only has 4 1/2 years of data.

Okay so how had SDY done since inception? Theres no evidence of out-performance for the spin-off aristocratic tool. (Again, who would want to ride this roller coaster off the tracks during a serious down cycle?)

The results for tracking the Mergent Dividend Achievers Select Index were a little better. Vanguard Dividend Appreciation (VIG) got the better of the S&P 500 SPDR Trust (SPY), though the exceptionally short time frame of less than 4 years is worth noting. Moreover, the Mergent Dividend Achievers Select Index only requires participating companies (142) to increase dividends in each of the previous 10 years.

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