REGL: This High Dividend MidCap ETF Looks Strong

REGL

ProShares S&P Midcap 400 Dividend Aristocrats ETF’s (BATS:REGL) holdings are high-quality companies that have not just paid dividends but grown them for at least 15 consecutive years. The chart below shows the strong price pattern of REGL since inception in early 2015.

After experiencing a 91% gain off the February lows of 2020, REGL has essentially avoided the bear market and been moving sideways for two years, digesting the large gain. From our experience a high level consolidation like this, when other sectors are declining, is one of the most powerful characteristics of a very strong market sector. It usually foreshadows another powerful move higher.

We first saw this happen in 1982 when the brokerage sector outperformed during that bear market. When price started up in August of 1982, the sector was the top price performer for the next year.

Let me make this idea clearer; it’s based on a phenomenon called “relative strength.” Investopedia defines relative strength as:

“Relative strength is a type of momentum investing used by technical analysts and value investors. It consists of selecting investments that have been outperforming their market or benchmark. Relative strength investors assume that the trend of out performance will continue.”

REGL has been outperforming the market for fourteen months now. Since December 31st, 2021, which was the start of the bear market, REGL is only down 6.3% while the S&P 500 is down 19.3%. Very few sectors or indices can match this. The theory says this out performance during the declining market should carry over once the bull market begins. Essentially REGL should outperform in the next bull market.

As we wrote in this article, we believe the bull market started in October of last year.

Growth in REGL Shareholders

The graph below displays the number of shares outstanding in REGL since inception. It hasn’t been constant growth but shows three distinct periods of rapid growth, the most recent being the large increase since October of last year. The number is approaching 25 million shares.

In our opinion this is better seen in the next chart, which shows the average daily dollar buying in the fund. This graph shows interest in the buying side of the fund only; shares outstanding is the result of net buying minus net selling.

Average buying in the fund reached $10 million a day in January of 2023, which is the highest amount since inception. It has since fallen by half, which is still an historically high amount. We think these investors sense something.

High REGL Dividend Yield Compared to MDY

One primary reason that makes REGL such as solid investment at this time is the high dividend yield. The current yield is 2.42%, which is higher than the State Street MidCap spider fund MDY by 1%. As the yield chart shows, it’s consistently produced higher yields then MDY, especially since the beginning of 2020.

Summary

Because our two Master Sentiment Indicators are both pointing to higher stock prices, and because of the strong price action of REGL during the bear market, we believe this fund is the perfect vehicle to profit from a move up in the market.