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.
S&P 500 applies the following criteria to construct the Dividend Aristocrats list:
- must be members of the S&P 500
- must have increased dividends every year for at least 25 consecutive years
- Market Cap at least USD 3 billion
- Liquidity at least USD 5 million (average daily value traded)
- Diversification, at least 40 constituents and not sector allocation above 30%
On January 24th, 2019, the following stocks were added to the Dividend Aristocrats Index:
Source: S&P News Release
See also an overview of all changes since 2009
The Dividend Aristocrats Excel spreadsheet contains the following fundamental and stock price performance metric for each stock in the index .
- Dividend & earnings per share
- Dividend Yield
- Price-to-earnings ratio
- Pay-out ratio
Stock price performance metric (Members only):
- 1 yr price target
- 10 year weighted compound annual growth rate (WCAGR / GEOPAK10)
- Win factor
- Loss ratio
- Total return
The S&P Dividend Aristocrats Index has outperformed the S&P 500 over the past decade. According to S&P, Dividend Aristocrats generated an annualized return of 13.70% over the past 10 years, easily beating the market’s 12.40% rate. Over this period, dividends accounted for 31% of the market’s total return.
The Dividend Aristocrats posted a +7.17% return in June 2019 and are up 15.94% for this year.
For the year 2018, the performance is -2.73%. See below the chart as of December 31, 2018.
The last diagram (below) shows the performance per holding period. The performance/yield triangle shows the average annual returns for any investment periods, ie combinations of buying and selling on an annual basis. The “year of buying” is plotted on the horizontal axis and the “year of selling” on the vertical axis. The average annualized return can be seen at the intersection of these two coordinates.
For example, those who acquired the dividend aristocrats at the end of 2000 and sold them at the end of 2002 achieved an average annual return of -0.08%. With an exit in 2003, however, a per-annum return (cagr) of 7.78% is calculated.
The average data in the bottom indicate which average annual yield was achieved at the start of the respective year. Starting with a position in the aristocrats at the end of 2000, Dividend Aristocrats (buy&hold) investors made e.g. average annual price returns of 8.07%.
Bear Years Dividend Aristocrats
As stated at the beginning of this article, “Higher total returns with lower volatility” are typical characteristics of the Dividend Aristocrats. The Dividend Aristocrats index has produced excellent returns over the last 28 years, beating The S&P 500’s average year returns over this time period. “Higher total returns with lower volatility” is also a key rule for long term investors.
Since the Dividend Aristocrats have historically seen smaller draw-downs during recessions versus the S&P 500. This makes holding through recessions easier and keeps for some investors the emotions away. Also, the time and effort to recover from smaller declines is easier, a 50% decline requires a 100% increase to reach the same levels again.
How the dividend aristocrats performed during negative years of the S&P 500 is summarized in the table below:
Going back to the performance/yield triangle, based on the “red” performances, it never took more than 3 years to recover from a draw-down. Only investors with a start in 2006, needed some time and patience to get back on track.
As explained the S&P Dividend Aristocrats Index currently contains 57 stocks with each equally-weighted. As you can see below, the consumer staples sector accounts for 24.3% of the index. This is not surprising given the stability of most consumer staples markets. Real Estate is on the other end of the spectrum at less than 1.8% of the S&P Dividend Aristocrats Index. (date: December 31 2018)
- Genuine Parts Company (GPC)
- Lowe’s (LOW)
- Target (TGT)
- Walgreens Boots Alliance (WBA)
- McDonald’s (MCD)
- Leggett & Platt (LEG)
- Wal-Mart (WMT)
- V.F. Corp (VFC)
- Archer Daniels Midland (ADM)
- Brown-Forman (BF.B)
- Hormel Foods (HRL)
- Kimberly-Clark (KMB)
- McCormick & Company (MKC)
- Sysco (SYY)
- Procter & Gamble (PG)
- Colgate-Palmolive (CL)
- Clorox (CLX)
- Coca-Cola (KO)
- Pepsico (PEP)
- 3M Company (MMM)
- A.O. Smith (AOS)
- Emerson Electric (EMR)
- Dover (DOV)
- Illinois Tool Works (ITW)
- W.W. Grainger (GWW)
- Pentair (PNR)
- Roper Technologies (ROP)
- Stanley Black & Decker (SWK)
- Cintas (CTAS)
- General Dynamics (GD)
- Caterpillar (CAT)
- United Technologies Corporation (UTX)
- S&P Global Inc (formerly McGraw Hill Financial) (SPGI)
- Aflac (AFL)
- Franklin Resources (BEN)
- T. Rowe Price (TROW)
- Cincinnati Financial (CINF)
- Chubb Limited (CB)
- People’s United Financial (PBCT)
- Federal Realty Investment Trust (FRT)
- Becton, Dickinson and Company (BDX)
- Cardinal Health (CAH)
- Medtronic (MDT)
- AbbVie (ABBV)
- Abbott Laboratories (ABT)
- Johnson & Johnson (JNJ)
- Consolidated Edison (ED)
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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