The famous Dividend Aristocrats are a select group of S&P 500 stocks with 25+ years of consecutive dividend increases. These are all large US companies since they are part of the S&P 500 Index. Although quarterly dividend pay-outs and yearly consecutive dividend increases are not common in Europe, there is a list of European Dividend aristocrats.
Difference European and US Dividend Aristocrats
The S&P 500 applies the following criteria to construct the US 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%
The European Dividend Aristocrats are based (by S&P) on the 40 highest dividend-yielding Eurozone companies within the S&P Europe Broad Market Index (BMI) and a managed dividends policy of increasing or stable dividends for at least 10 consecutive years.
Next to the currencies (EUR vs USD), the two major differences are:
- Increasing or stable dividends for at least 10 consecutive years vs 25 consecutive years (US)
- 40 highest dividend-yielding (EU), in the US the height of the yield is not a selection factor.
The Dividend European Aristocrats Excel spreadsheet contains the following fundamental and stock price performance metrics for each stock in the index.
- Dividend & earnings per share
- Dividend Yield
- 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
In January 2022, the Euro Dividend Aristocrats index changes are:
- Red Electrica Corp.
- Huhtamaki Oyj (ISIN FI0009000459)
- Merck KGaA (DE0006599905)
In June 2021, S&P has announced an update to the Monthly Dividend Review (“MDR”) for the UK and high-yield euro dividend aristocrats.
A relevant change is to focus more on the quality of dividends. The Constituent Selection Rule is now:
“Stocks must have increased or maintained stable dividends for at least 10 consecutive years. Stocks cannot have an indicated yield of more than 10% as of the index rebalancing reference date. In addition, new index constituents must have a maximum 100% dividend payout ratio, and existing index constituents must have a non-negative dividend payout ratio”
In 2021 the Euro Dividend Aristocrats index ended up 15.58%. The annualized total return over 10 years is 9.5%. The benchmark for the Euro Dividend Aristocrats index ended just a bit higher with a 16.31% total return.
The indicated dividend yield is around 3.2% and the average projected PE is 16.2 for the stocks in this index.
As explained the European Dividend Aristocrats Index currently contains 40 stocks. As you can see below, the “Utilities” sector accounts for 25.8% of the index. “Energy” is on the other end of the spectrum at 3% of the European Dividend Aristocrats Index. To compare, the largest US dividend aristocrats sector is Consumer staples.
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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