The famous US Dividend Aristocrats are a select group of S&P 500 stocks with 25+ years of consecutive dividend increases. The UK Dividend Aristocrats Index is created by S&P and is based on a managed dividends policy of increasing or stable dividends for at least 7 consecutive years. In Europe, it is not common to focus on paying a dividend in a row ( consecutive years) to the shareholders.
Difference UK 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 UK Dividend Aristocrats are based (by S&P) on the 40 highest dividend-yielding UK companies within the S&P Europe Broad Market Index (BMI) and a managed dividends policy of increasing or stable dividends for at least 7 consecutive years.
Next to the currencies (GBP vs USD), the two major difference are:
- Increasing or stable dividends for at least 7 consecutive years vs 25 consecutive years (US)
- 40 highest dividend-yielding (UK), in the US the height of the yield is not a selection factor.
The Dividend UK 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
There is also a European Dividend Aristocrats list, which entails European stocks with 10+ consecutive years of dividend increases or stable dividends.
As explained the UK Dividend Aristocrats Index currently contains 40 stocks. As you can see below, the Financial sector accounts for 23.7% of the index. Real Estate is on the other end of the spectrum at less than 5% of the European Dividend Aristocrats Index. To compare, the largest US dividend aristocrats sector is Consumer staples.
High Yield Dividend UK Stocks
The UK Dividend Aristocrats are based on the 40 highest dividend-yielding UK companies with increasing or stable dividends for at least 7 consecutive years. High yields are typically seen as a warning sign that dividends are unsustainable. For the UK stocks one should keep in mind that dividend yields on (all) UK shares are at their highest level, on average 4.8%, since 2009. So the UK Dividend Aristocrats list will consist of many stocks above this average.
Dividends continue to grow even while investors have concerns over the trade war, Brexit and interest rates. Rising profitability, more special dividends, and a weaker pound helped UK dividends rise 5.1% in 2018 to a record GBP 99.8bn. Forecasts for 2019 are even higher and expecting the total dividends paid to GBP 104bn.
It will not be a surprise that the top-5 of the highest UK dividend aristocrats yields are well above 5% (as of 01/28/2019):
- SSE Plc, dividend yield 8.40%
- BAT, 8.22%
- Imperial Brands, 7.95%
- Hammerson, 7.06%
- WPP, 6.88%
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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