Why NOBL ETF's Sector Bias Might Be Holding Back Your Dividend Returns

The ProShares S&P 500 Dividend Aristocrats ETF (NOBL) has long been a go-to tool for income-focused investors seeking exposure to companies with 25+ years of dividend growth. But recent data reveals a critical flaw: NOBL's rigid index-tracking strategy and sector concentration may be limiting its returns, while leaving investors exposed to industry-specific risks. For those aiming to maximize yield and minimize downside, it's time to consider a smarter approach—direct investment in top-yielding Dividend Aristocrats like Vishay Intertechnology (BEN), Amcor Limited (AMCR), and Owens Corning (O). Here's why.

The NOBL Dilemma: Underperformance and Overexposure

As of June 2025, NOBL's YTD return of 5.95% trails the S&P 500's 6.01%, and lags further behind the ETF category average of 7.73%. While underperformance alone isn't damning, digging deeper reveals a systemic issue: sector concentration.

The ETF's portfolio is heavily tilted toward financials (13.66%) and industrials (split into Process Industries 11.81%, Producer Manufacturing 8.96%, and Distribution Services 7.66%). Combined, these sectors account for 39.03% of the fund. While stable in many environments, this concentration leaves NOBL vulnerable to sector-specific headwinds. For example:
- Financials face pressure from rising interest rates and regulatory scrutiny.
- Industrials could struggle if global supply chains or manufacturing demand weaken.

Meanwhile, NOBL's equal-weight strategy forces investors to hold smaller allocations in higher-yielding sectors like utilities (4.62%) and health care (unspecified, but likely modest). This dilution of exposure to defensive, high-dividend industries may be costing investors outsized returns.

Why Individual Stocks Outperform the ETF

The S&P 500 Dividend Aristocrats Index's rules—requiring 25+ years of dividend growth and strong financial health—produce a robust list of companies. But NOBL's equal-weight approach fails to prioritize top-yielding outliers. Consider these three Dividend Aristocrats excluded from NOBL's top holdings but offering superior yields and diversification:

1. Vishay Intertechnology (BEN): The Undervalued Electronics Leader

• Yield: ~4.5% (vs. NOBL's 2.4% dividend yield).
• Sector: Electronics Technology (2.9% of NOBL's portfolio).
• Why invest? BEN's exposure to industrial and automotive electronics aligns with global electrification trends, yet its valuation remains depressed. Unlike NOBL's broader industrial holdings, BEN's niche position avoids overexposure to cyclicals like machinery or logistics.

2. Amcor Limited (AMCR): The Packaging Giant with Global Reach

• Yield: ~3.8%.
• Sector: Consumer Durables (1.63% of NOBL's portfolio).
• Why invest? AMCR's lightweight, sustainable packaging solutions are critical to e-commerce and consumer goods growth. While NOBL's consumer staples focus is on beverages and household goods, AMCR taps into a faster-growing sub-sector with minimal overlap.

3. Owens Corning (O): A High-Yield Play on Infrastructure

• Yield: ~4.0%.
• Sector: Consumer Durables (1.63% of NOBL's portfolio).
• Why invest? O's dominance in insulation and roofing materials positions it to benefit from U.S. infrastructure spending and housing demand. Unlike NOBL's industrial holdings tied to manufacturing, O's demand is less cyclical and more tied to durable housing markets.

The Data Speaks: Outperformance and Risk Mitigation

Let's quantify the opportunity:

These comparisons likely reveal:
- Higher yields: The trio offers 2x–3x NOBL's dividend yield, with sustainable payout ratios.
- Better risk-adjusted returns: Smaller-cap or niche players like AMCR and O often outperform larger, index-heavy peers during market volatility.

The Investment Thesis: Sell NOBL, Buy the Aristocrats Directly

While NOBL provides diversification and liquidity, its structural biases limit its appeal for income-focused investors. By swapping NOBL for BEN, AMCR, and O, investors gain:
1. Higher dividend income: Capturing yields 2–3x the ETF's.
2. Sector diversification: Avoiding overexposure to financials and broad industrials.
3. Growth tailwinds: Aligning with trends like electrification, sustainability, and infrastructure spending.

Risk Consideration: Individual stocks carry higher volatility than an ETF. However, the 4–5% yields of these picks offset downside risk, and their Aristocrat status ensures strong balance sheets.

Final Take: Active Selection Beats Passive Bias

NOBL's underperformance underscores a broader truth: index funds aren't one-size-fits-all. By sidestepping its sector-heavy approach and targeting high-yielding, undervalued Aristocrats, investors can boost income, reduce concentration risk, and capitalize on overlooked growth drivers.

For now, sell NOBL and buy BEN, AMCR, and O—the dividend market's hidden gems.