- The Dividend Aristocrats generated a solid 1.92% return in August but lagged the broader S&P 500 by 1.12%.
- The Dividend Aristocrats are a select group of currently 65 S&P 500 stocks with 25+ years of consecutive dividend increases.
- Almost 90% of the Dividend Aristocrats are beating Q2-2021 EPS estimates.
- By showing the recent performance of the Dividend Aristocrats, some active dividend growth investors may be able to identify relative bargains.
U.S. equities extend their rally in August, climbing above 21% year to date. The S&P 500 (SPY) posted a gain of 3% for the month, fears of a faster tapering faded away and strong earnings reports did send the market higher.
The S&P 500 index closed with a seventh straight monthly gain and Wall Street Analysts remain optimistic for the rest of the year. Wells Fargo Securities lifted the year-end S&P 500 target to 4,825.
The S&P 500 Dividend Aristocrats Index (NOBL) gained another 1.92% in August and is up 19.5% for the year. The Dividend Aristocrat Index trailed the S&P 500 by 112bp this month.
The tech sector has been the main sector that drove under/overperformance for the Dividend Aristocrats versus the broad market. While the S&P 500 has a 27.9% weight to the tech sector, the weight in the dividend aristocrats index is just 3%.
The Dividend Aristocrats Index clearly didn’t benefit in August from its tech underweight and Industrials/Materials overweights.
The current 10-years annualized return is 15.57% for the Dividend Aristocrats (NOBL) versus 16.34% for the S&P 500.
Good to keep in mind that over a time period of 30 years and multiple recessions, the dividend aristocrats strategy has outperformed the S&P 500 by nearly 2% per year.
The current dividend yield is 2.28% well above the 1.37% for the S&P 500 index.
Dividend Aristocrats performance in August 2021
Gains for the Dividend Aristocrats were mixed in the month of August with 40 constituents with positive returns and 25 constituents with negative returns. The earnings season has been one of the main drivers for this month’s performances.
The table below lists all 65 constituents, including the three 2021 dividend aristocrats IBM, NextEra Energy & West Pharmaceutical Services, sorted by indicated dividend yield and lists price returns over trailing last month, 3-, 6-, and 12-month periods.
Key takeaways for August:
- AT&T (T) is still leading the top-10 “high yielders” with a dividend yield of 7.49%. Other high-yield dividend payers are Exxon Mobil, Chevron (CVX), and IBM (IBM). 47 Dividend Aristocrats are paying a dividend yield above the S&P 500 average yield.
- Albemarle (ALB) posted strong Q2 earnings in August and has raised its full-year earnings guidance.
- Consumer staples manufacturer Clorox (CLX) dropped after missing earnings, and revenues estimates, and slashing guidance for the full year. Clorox lost 7% in August.
- Cardinal Health EPS were $0.43 (35%) lower than expected and resulted in an 11% stock price drop in August.
- Amcor Plc (AMCR) reported the fiscal year 2021 (ended Jun 30, 2021) adjusted earnings per share of 74 cents, in line with estimates. The stronger outlook for fiscal 2022 resulted in an 11% gain this month.
Looking back 12 months, Steelmaker Nucor (NUE) is the big winner, the higher share price is based on a supply/demand imbalance for materials and the large-scale US infrastructure plans. Two other winners worth mentioning are Albemarle Corporation (ALB) active in the materials sector and West Pharmaceutical Services (WST).
Here are a couple of notable dividend increases:
- Illinois Tool Works (ITW) declared $1.22 per share quarterly dividend, a 7% increase from a prior dividend of $1.14.
- Stanley Black & Decker (SWK) declared $0.79 per share quarterly dividend, a 12.9% increase from a prior dividend of $0.70.
- Target (TGT) declared $0.90 per share quarterly dividend, a 32.4% increase from a prior dividend of $0.68.
Dividend Aristocrats beating EPS Estimates
88% of the Dividend Aristocrats reported Q2-2021 earnings-per-share that are beating estimates. Financial Services and Consumer Defensive were the two sectors with the highest “surprise”-percentage.
Only seven (out of sixty-five) Dividend Aristocrats missed EPS estimates and in many cases, this resulted in lower share prices.
In the table below, the list of the current Dividend Aristocrat constituents is sorted descending by surprise percentages and lists the reported date, reported EPS, and estimated EPS plus the difference between those two values.
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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