Defensive Aristocrats outperformed the S&P 500 in July

U.S. equities ended July in positive territory, with the S&P 500 (SPX) posting a gain of 2%, despite concerns about the COVID “delta variant”, and rising inflation. Several Dividend Aristocrats reported strong Q2-2021 earnings and improved outlooks for 2021 in the last two weeks. In July, the Defensive Aristocrats outperformed the S&P 500 index.

The Defensive Dividend Aristocrats gained 3.37% in July, and the total return is now 9.73% in 2021. In July, the Dividend Aristocrats gained 2.17%, close to the performance of the S&P 500 index gaining 2.38%. The Defensive Dividend Aristocrats outperformed the US dividend aristocrats and the S&P 500 index by almost 1%. The table below lists the monthly performance.

In July, Ecolab (ECL), Sherwin-Williams Company (SHW), and Procter & Gamble (PG) gained the most with more than 6%. Year-to-date the best performing defensive Aristocrats so far are A.O.Smith (AOS) and Sherwin-Williams Company (SHW) with 28.29% and 18.80%. This is excluding the dividends received.

In the long run, the performance of the defensive aristocrats is still above the S&P 500 and dividend aristocrats as shown in the chart and table below.

The Defensive Dividend Aristocrats’ objective is to outperform the Dividend Aristocrats over any five-year rolling time horizon, especially in bear markets. The maximum draw-down (mdd) should be lower.

The idea of the Defensive Dividend Aristocrats is to invest in 10 Dividend Aristocrats that are selected based on price-return and risk-ratios at year-end. Combined with the dividend growth characteristics of all Aristocrats, this should result in a comfortable set of companies for a long-term dividend portfolio.

The Defensive Aristocrats are selected on performance-based criteria:

• Geometric Annual performance of the last 10 years (GeoAP10)
• Win-ratio, the chance of a positive monthly performance (over 7000 calculations)
• Loss-ratio, the chance of a monthly loss multiplied by the weighted average loss

Aspects such as dividend yield or dividend growth are not taken into consideration in this approach.

Read more on: Defensive Aristocrats methodology

Members can use the screener to find the current best dividend aristocrats based on loss-ratio.