The S&p 500 closed the year 2018 with a total return of -4.38% and the Dividend Aristocrats ended the year with -2.73%. The Defensive Dividend Aristocrats ended the year up with 3.27% showing the strength of defensive power in a negative year!
Defensive Dividend Aristocrats approach
The Dividend Aristocrats are a select group of currently 57 S&P 500 stocks with 25+ years of consecutive dividend increases. These 57 are large, US companies that have historically provided (slightly) better performance and (slightly) lower volatility than the S&P 500 as a whole.
The idea of the Defensive Dividend Aristocrats is to invest in a selecting of 10 Dividend Aristocrats that are comfortable holdings for a long-term dividend portfolio.
The Defensive Aristocrats are selected on performance-based criteria:
- Geometric Annual performance of the last 10 years
- Win-ratio, the chance of a positive monthly performance
- Loss-ratio, the chance of a monthly loss multiplied by the weighted average loss
The above diagram display that the “blue” stock is preferred over the “yellow” since the performance (Geometric Annual performance of the last 10 years) is higher and the risk (Loss-ratio) is lower.
The 10 Dividend Aristocrats with the best performance-risk characteristics and in an up-trend are selected at every year end for the holding period of a year.
The diagram below shows an example of dividend aristocrats plotted with the performance and risk valuation.
The 10 selected Dividend Aristocrats should result in an on average higher performance and a lower risk, in the end, those dividend stocks will outperform the related indices. Especially in a bear market.
See for more information the defensive aristocrats.
Other Sources of Dividend Investment Ideas
The Dividend Aristocrats list is not the only way to quickly screen for businesses that regularly pay rising dividends.
- The Dividend Kings List is even more exclusive than the Dividend Aristocrats. It is comprised of less than 20 businesses with 50+ years of consecutive dividend increases.
- The MoneyInvestExpert Defensive Aristocrats is a performance-based top-10 selection of the Dividend Aristocrats to outperform the market on the long-term.
- Portfolio lists like the Berkshire Hathaway Portfolio or Bill Gates’stock portfolio can be a source.
- For the European focused investors there is also the list of European Dividend Aristocrats.
- Dividend Champions are not necessarily members of the S&P 500 index, have increased their dividend for 25 or more consecutive years.
- 100+ years of dividend, the list of stocks that pay over 100 year of dividend can be an list of inspiration.
Next to selecting the right dividend stocks, important principles for successful long-term investing are Disciple, Diversification, Defensive & indeed Dividend. Read more about this in our free e-book.
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