Investors facing a weakening economy and a stock market struggling for direction may want to retreat to the comfort of companies that keep rewarding their shareholders in the form of dividends. Wolfe Research strategist Chris Senyek said in a note to clients on Tuesday that the slowing U.S. economy should push investors toward stocks that reliably throw off cash. Wolfe’s favorite group in this environment is the so-called “dividend aristocrats” — companies that have consistently hiked their dividends for 25 years or more. Senyek said that group is currently trading at a market multiple and typically outperforms heading into a recession. “With banks increasingly tightening credit and the lagged effects of rate hikes fully taking hold, we expect the U.S. economy to slow over the coming months. In this environment, high quality dividend investing themes should outperform the broader market,” the note said. One simple way for investors to buy into the aristocrats is the ProShares S & P 500 Dividend Aristocrats ETF (NOBL). The fund has underperformed so far this year, with a total return of about 2%. NOBL has roughly $11 billion in assets and an expense ratio of 0.35%. NOBL YTD mountain The NOBL ETF is underperforming the broader market in 2023. The fund includes 66 companies that are equally weighted when it is rebalanced. Its top holdings currently are Albemarle , Pentair and Cardinal Health . NOBL distributes payouts quarterly, with the latest a fraction above 35 cents per share in March. Its distribution yield is 2.42%, according to FactSet. A similar fund is the SPDR S & P Dividend ETF (SDY) , which tracks an index of stocks in the S & P 1500 Index that have increased dividends for at least 20 consecutive years. That fund weights stocks by yield, and has a distribution yield of 3.04%, also accoridng to FactSet. SDY, which also has an expense ratio of 0.35%, has a negative total return of about -2.6% year to date. — CNBC’s Michael Bloom contributed to this report.
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