Dividend Aristocrats are dividend winners who have consistently provided investors with increasing dividends year in and year out. Dividend Aristocrats make a great addition to a portfolio of dividend stocks. They are a great place to start your search for the next company to add to your portfolio.
- Dividends provide income from your investment, rather than capital gains which are based on appreciation or depreciation in the stock price
- A dividend stock is typically less volatile than other asset classes such as stocks or mutual funds
- Investors should look for dividend payers that have been around for at least 25+ years and have increased their dividend payment every year during this time frame (known as “dividend growth”)
- Investors should look for dividend payers that have been around for at least 25+ years and have increased their dividend payment every year during this time frame (known as “dividend growth”)
- Dividends provide income from your investment, rather than capital gains which are based on appreciation or depreciation in the stock price
The Dividend Aristocrat Index was first published by Standard & Poors in 1991. The index consists of 53 companies that meet the following criteria:
- 3 consecutive years of dividend payments
- dividend yields higher than all S&P components
- market capitalization above $3 billion
A dividend yield is a ratio that compares the dividend per share against the current stock price. A dividend yield higher than the S&P 500 average (2.12%) indicates dividend stocks provide more income for investors. Their dividend payouts will grow with time as underlying company earnings increase, further supporting the Dividend Aristocrat Index’s commitment to raising dividends over time.
What is a Dividend Aristocrat?
The Standard &Poor’s S&P 500 Dividend Aristocrats Index defines and lists the Dividend Aristocrats.
Being a Dividend Aristocrat is a hard title for a company to earn, and it is even harder to keep. To get into this exclusive club, a company must consistently raise its dividends for 25 consecutive years each year. If the company simply maintains its annual dividend payout or lowers the dividend even in tough times, they are removed from the list. Additionally, it will take another 25 years to earn its place back.
The 2008 to 2009 Financial Crisis saw many bellwether stocks cut or eliminate their dividends altogether. Entire industries and companies that were considered rock-solid dividend payers lost their aristocrat status. Former stalwart stocks such as General Electric (NYSE: GE) saw their membership in the exclusive Dividend Aristocrat club revoked after cutting their dividend.
Benefits of Dividend Aristocrats in Your Portfolio
If dividend-paying stocks are stable companies that reduce your risk, then the Dividend Aristocrats are risk reduction on steroids. Granted, nothing is a guaranteed panacea for risk, and the financial crisis of 2008 showed that even the Dividend Aristocrats could be at risk for macro-level problems. However, if safety is what you are looking for, the Dividend Aristocrats are a great place to start your search. They provide consistent dividend payouts and the potential for share price appreciation.
As dividend investors, there are a few things that we look for in dividend-paying stocks. One of the most important factors is the consistency of dividend payouts and the potential share price appreciation. Dividend Aristocrats provide both of these features. They have consistent dividend payouts, and their dividend rate has increased throughout the past thirty years.
The Dividend Aristocrats also have 25+ years of dividend growth over 10%. This means that you can confidently invest in them that their dividend payout will slowly grow to be a larger share of their earnings over time.
Dividend aristocrat benefits
– The dividend rate has increased over the last 25 years, which means you can invest with certainty, knowing it will continue to grow in the future.
– Investing in dividend aristocrats is a great way to build wealth for life!
– Dividend aristocrats are great companies that offer dividend payments with stability.
– dividend aristocrats provide dividend payments consistently, which helps reduce risk in your portfolio.
– dividend aristocrats, like all dividend payers, have the potential for dividend growth over time.
– dividend aristocrat benefits include being solid, consistent companies that provide consistency in dividend payments and share price appreciation over time.
Characteristics of a Dividend Aristocrat
Dividend Aristocrats have several fundamental characteristics in common with each other. Most of the stocks that make the list are tried and true multinational blue-chip companies.
Many have a beta near 1.0 and continue to mirror overall stock market movements. Additionally, Dividend Aristocrats that are part of the S&P 500 index have a large market capitalization and liquidity for large trading volumes.
Current Dividend Aristocrats in the S&P 500
Here is a list of the current companies that comprise the Standard & Poor’s 500 Dividend Aristocrat Index (as of August 2013).
| Company | Ticker symbol | Sector |
| 3M | MMM | Industrials |
| A.O. Smith | AOS | Industrials |
| Abbott Laboratories | ABT | Health Care |
| AbbVie | ABBV | Health Care |
| AFLAC | AFL | Financials |
| Air Products & Chemicals | APD | Materials |
| Albemarle Corporation | ALB | Materials |
| Amcor | AMCR | Materials |
| Archer-Daniels-Midland Co | ADM | Consumer Staples |
| AT&T Inc | T | Communications |
| Atmos Energy Corp | ATO | Utilities |
| Automatic Data Processing | ADP | Information Technology |
| Becton Dickinson & Co | BDX | Health Care |
| Brown–Forman B | BF.B | Consumer Staples |
| Cardinal Health Inc | CAH | Health Care |
| Caterpillar Inc | CAT | Industrials |
| Chevron Corp | CVX | Energy |
| Chubb Limited | CB | Financials |
| Cincinnati Financial Corp | CINF | Financials |
| Cintas Corp | CTAS | Industrials |
| Clorox | CLX | Consumer Staples |
| Coca-Cola Co | KO | Consumer Staples |
| Colgate-Palmolive | CL | Consumer Staples |
| Consolidated Edison Inc | ED | Utilities |
| Dover Corp | DOV | Industrials |
| Ecolab Inc | ECL | Materials |
| Emerson Electric | EMR | Industrials |
| Essex Property Trust | ESS | Real Estate |
| Expeditors International of Washington | EXPD | Industrials |
| Exxon Mobil Corp | XOM | Energy |
| Federal Realty Investment Trust | FRT | Real Estate |
| Franklin Resources Inc | BEN | Financials |
| General Dynamics | GD | Industrials |
| Genuine Parts Company | GPC | Consumer Discretionary |
| Hormel Foods Corp | HRL | Consumer Staples |
| Illinois Tool Works | ITW | Industrials |
| IBM | IBM | Information Technology |
| Johnson & Johnson | JNJ | Health Care |
| Kimberly-Clark | KMB | Consumer Staples |
| Leggett & Platt | LEG | Consumer Discretionary |
| Linde plc | LIN | Materials |
| Lowe’s | LOW | Consumer Discretionary |
| McCormick & Company | MKC | Consumer Staples |
| McDonald’s Corp | MCD | Consumer Discretionary |
| Medtronic plc | MDT | Health Care |
| NextEra Energy | NEE | Utilities |
| Nucor Corp | NUE | Materials |
| Pentair | PNR | Industrials |
| People’s United Financial | PBCT | Financials |
| PepsiCo | PEP | Consumer Staples |
| PPG Industries | PPG | Materials |
| Procter & Gamble | PG | Consumer Staples |
| Realty Income | O | Real Estate |
| Roper Technologies | ROP | Industrials |
| S&P Global Inc | SPGI | Financials |
| Sherwin-Williams | SHW | Materials |
| Stanley Black & Decker | SWK | Industrials |
| Sysco Corp | SYY | Consumer Staples |
| T Rowe Price Group Inc | TROW | Financials |
| Target Corp | TGT | Consumer Discretionary |
| VF Corporation | VFC | Consumer Discretionary |
| W. W. Grainger | GWW | Industrials |
| Walgreens Boots Alliance | WBA | Consumer Staples |
| Walmart Inc. | WMT | Consumer Staples |
| West Pharmaceutical Services Inc | WST | Health Care |
Starting with the Dividend Aristocrats, you can narrow down your search. You can focus and invest in the largest tried and true dividend payers, many with global reach.
Do you like investing in the Dividend Aristocrats? Why are they on your list? Or, why do you stay away from them? I’d love to hear your thoughts in the comment section below.
Hank Coleman is a personal finance expert who writes about finance, retirement, and investing on his blog, Money Q&A. Be sure to also follow him on Twitter @MoneyQandA and check out his podcast on,“Your Money: Your Choices”, on iTunes.
Most of these companies are at the point where I would assume they have already undertaken most of the growth they are expected to be able to have – hence distributing earnings in the form of dividends as opposed to reinvesting back into growth.
I think the aristocrats are great for those seeking financial independence – allowing for a regular income stream without having to sell down you position.
Hello FI,
I believe your assumption is incorrect. These DA’s pay out a portion of their earnings as dividends (30% to 70%), and the rest they retain for operational expenses and growth. Albiet it may be a slower growth rate than smaller cap companies, but that is why they have the stability. Slow and steady wins the day!
This is the Dividend Payout Ratio:
http://www.dividendninja.com/the-dividend-payout-ratio-2/
Cheers!
btw
I just wanted to say, congrats on starting your investing and financial independence journey so early! 🙂
I am confused. AbbVie (ABBV) has existed for something like a year as a spin off from Abbott Labs.
>>To get into this exclusive club, a company must consistently raise its dividends each year for 25 consecutive years.
How can it be considered a DA if the company has existed for such short time? So it look like they are considering Abbott Lab’s history. Kind of weird…
Hey average guy,
Nice catch, but its definitely considered a dividend aristocrat by S&P:
http://ca.spindices.com/indices/strategy/sp-500-dividend-aristocrats
This seems to be the way they treat spin-offs, so the issue here is with S&P methodology. You would have to dig deeper into their methodology (via their PDF) to see why.
For what it’s worth (which isn’t much) I agree with your view. 😉
Cheers
Avrom
What are the best ETF’s to play the USA aristocrats and is there a CDN ETF aristocrat. Is it a good time to get into these or wait for a pull back.Thanks
Hi Morg,
I don’t try to time the market, so I invest capital when the funds are available and/or add to current holdings. Every 6 months I look at the market it looks topped out and then continues to go higher. At some point I’m sure there will be a pull-back or market correction. But I’d rather have my money into paying dividends and distributions than sitting on cash which earns nothing. I am more interested in having my portfolio generate income than worrying about the right time to buy – which in reality none of us know. 😉
Regearding the ETFs sounds like a post I should write!
Cheers
I’m very sorry for the late reply here:
ETFs for US Aristocrats:
http://www.dividendninja.com/sdy-a-us-dividend-aristocrat-etf/
http://www.dividendninja.com/claymores-new-dividend-etf-cud/
(Keep in mind these are yield weighted ETFs. It’s the High Yield Dividend Aristocrats Index, not the Dividend Aristocrats Index. I cover that point in the CUD article.)
For the Canadian TSX Aristocrat Index, the ETF is CDZ-T. I’ll write a post on that too! 🙂
Cheers
I’m curious what would make it better to buy individual dividend aristocrats rather than buying an etf of dividend aristocrats. Or perhaps a mix of both would be nice. Can you give me the reason why someone like yourself would rather pick them than let an etf do it for you? Do you get more out of the dividends if you pick them individually?