S&P 500 Dividend Aristocrats Index – A History of Increased Dividend Payments

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Dividend Aristocrats
Each year, Standard and Poor’s publishes its Dividend Aristocrats index of dividend-paying stocks. To many income investors, this list is considered the Holy Grail of income stocks. It is comprised of some of the world’s most well managed and profitable blue chip companies that can make for great investment opportunities. Table of Contents The Dividend…

Each year, Standard and Poor’s publishes its Dividend Aristocrats index of dividend-paying stocks. To many income investors, this list is considered the Holy Grail of income stocks. It is comprised of some of the world’s most well managed and profitable blue chip companies that can make for great investment opportunities.

The Dividend Aristocrats Index

Dividend AristocratsMembers of the Dividend Aristocrats are not the highest yielding stocks available. You won’t find any double-digit yields amongst its members. In fact, most companies in this index have current yields below 4% and are usually between 2.0% – 2.5%.

Instead of finding high yields, investors get a great list of stocks that offer consistent dividend increases. While the Aristocrats may not be the most glamorous investment options, they are usually dependable and stable. The index relies more on historical dividend trends of stocks as opposed to chasing the highest yields.

So how does a stock become a member of this prestigious index?

How to Become a Dividend Aristocrat

The criterion for becoming an Aristocrat is quite simple. First, a stock must be a large cap, blue chip company and a member of the S&P 500. Second, the company must have raised their dividends annually for at least 25 consecutive years.

Those two criteria are used each December to re-balance the index for the upcoming year. If an existing member cuts their dividend over the course of the next 12 months, they are dropped from the index the following December. Even if a company on the list decides to freeze their dividend for a year, they are removed from the index. This criterion allows for only the elite dividend payers to be included.

Just as some stocks are removed from the index each year, any member of the S&P 500 that hits the 25-year threshold of consistently raising dividends are added each December. This annual review ensures that only the most consistent dividend stocks are included in the index.

Note: The list of Dividend Aristocrats was recently re-balanced for 2019 and includes over 50 investment options. For more details about the index, check out the Standard and Poor’s site highlighting the Dividend Aristocrats members for the upcoming year.

2019 Dividend Aristocrats List

This is the S&P 500 Dividend Aristocrat companies as of April 12, 2019 (source):

Ticker SymbolCompanyGICS Economic SectorGICS Sub-Industry
MMM3M CompanyIndustrialsIndustrial Conglomerates
ABBVAbbVie Inc.Health CareBiotechnology
ABTAbbott LaboratoriesHealth CareHealth Care Equipment & Supplies
AFLAFLAC Inc.FinancialsInsurance
APDAir Products & Chemicals IncMaterialsChemicals
AOSA.O. SmithIndustrialsBuilding Products
ADMArcher-Daniels-Midland CoConsumer StaplesFood Products
TAT&TCommunication ServicesDiversified Telecommunication Services
ADPAutomatic Data ProcessingInformation TechnologyIT Services
BDXBecton DickinsonHealth CareHealth Care Equipment & Supplies
BF.BBrown-Forman (Class B shares)Consumer StaplesBeverages
CAHCardinal Health Inc.Health CareHealth Care Providers & Services
CATCaterpillar Inc.IndustrialsMachinery
CVXChevron Corp.EnergyOil, Gas & Consumable Fuels
CBChubb LimitedFinancialsInsurance
CINFCincinnati Financial CorpFinancialsInsurance
CTASCintas CorpIndustrialsCommercial Services & Supplies
CLXThe Clorox CompanyConsumer StaplesHousehold Products
KOCoca-Cola CoConsumer StaplesBeverages
CLColgate-PalmoliveConsumer StaplesHousehold Products
EDConsolidated Edison IncUtilitiesMulti-Utilities
DOVDover CorpIndustrialsMachinery
ECLEcolab IncMaterialsChemicals
EMREmerson ElectricIndustrialsElectrical Equipment
XOMExxon Mobil CorpEnergyOil, Gas & Consumable Fuels
FRTFederal Realty Investment TrustReal EstateEquity REITs
BENFranklin ResourcesFinancialsCapital Markets
GDGeneral DynamicsIndustrialsAerospace & Defense
GPCGenuine Parts CompanyConsumer DiscretionaryDistributors
HRLHormel Foods CorpConsumer StaplesFood Products
ITWIllinois Tool WorksIndustrialsMachinery
JNJJohnson & JohnsonHealth CarePharmaceuticals
KMBKimberly-ClarkConsumer StaplesHousehold Products
LEGLeggett & PlattConsumer DiscretionaryHousehold Durables
LINLinde plcMaterialsChemicals
LOWLowe's Companies, Inc.Consumer DiscretionarySpecialty Retail
MKCMcCormick & CompanyConsumer StaplesFood Products
MCDMcDonald'sConsumer DiscretionaryHotels, Restaurants & Leisure
MDTMedtronicHealth CareHealth Care Equipment & Supplies
NUENucorMaterialsMetals & Mining
PPGPPG IndustriesMaterialsChemicals
PEPPepsiCoConsumer StaplesBeverages
PBCTPeople's United FinancialFinancialsBanks
PGProcter & GambleConsumer StaplesHousehold Products
ROPRoper TechnologiesIndustrialsIndustrial Conglomerates
SPGIS&P Global (formerly McGraw Hill Financial, Inc.)FinancialsCapital Markets
SWKStanley Black & Decker Inc.IndustrialsMachinery
SYYSyscoConsumer StaplesFood & Staples Retailing
TROWT. Rowe PriceFinancialsCapital Markets
TGTTarget CorporationConsumer DiscretionaryMultiline Retail
UTXUnited Technologies CorporationIndustrialsAerospace & Defense
VFCVF CorporationConsumer DiscretionaryTextiles, Apparel & Luxury Goods
GWWW. W. GraingerIndustrialsTrading Companies & Distributors
WMTWalmartConsumer StaplesFood & Staples Retailing
WBAWalgreens Boots AllianceConsumer StaplesFood & Staples Retailing

Investing in the Aristocrats

While this index of top dividend stocks highlights consistent performance, it should not signal an immediate buy for investors for several reasons.

First, the index is only reviewed annually each December. A company that cuts its dividend during the year is actually not removed until the review period, which can be a little misleading. During the financial crisis a few years back, several financial companies (i.e. Bank of America) were found on the index but were forced to make dividend cuts to stay in business. Investors should always check if a company has frozen or cut its dividend during the past 12 months.

Investors should also do their own due diligence on a stock found in this index prior to making a purchase. There are other factors involved than just consistent dividend increases.

For example, a company may have a very high payout ratio that increases each year. An increase in this ratio means that a company is paying more and more of their earnings in the form of dividends instead of investing it back into growing the organization. This could actually be a red flag of a future dividend cut for investors as the company may not be able to maintain dividend increases much longer.

Another reason why not every member of the Dividend Aristocrats is a good investment is the current yield. There are several stocks on the index that actually have a yield under 2.0%. While they may have a good history of providing annual dividend increases, the yield may be just too low. As the yield drops below this threshold, other investments like certificates of deposit become more attractive. Why risk your money in the stock market when you can get a guaranteed return on a CD?

Alternatives to the Dividend Aristocrats

Start dividend investing portfolio
Dividend investing doesn’t have to be difficult.

The Dividend Aristocrats list can be a great starting point to help narrow down which stocks to purchase for your investment portfolio. But it is not the only list to help investors find stocks to invest in.

Fortunately, we have some great tools at our disposal for getting started!

One such tool is the Dividend Champions list of stocks. I have been using this resource to search for new investment ideas. The publication also offers a wealth of dividend data for the stocks that it tracks.

This resource has saved me a lot of headaches when it comes to investing.

What are Dividend Champions?

The Dividend Champions is a list of stocks that was created by Dave Fish in 2007. The list is now maintained by Justin Law. The list of Dividend Champions must meet certain requirements. The first criterion to be included is that the stock must be traded in the US. Secondly, the list only includes companies that have increased dividends for a minimum of 25 consecutive years.

This type of criteria may already sound familiar to some. For example, the S&P 500 Dividend Aristocrat list only includes companies that have raised their distributions for 25 consecutive years as well.

The one big difference is that Dividend Aristocrats must meet other criteria – one being a member of the S&P 500.

The Dividend Aristocrat index is a great place to start looking for potential investment ideas. However, it is limited in that it filters out a lot of great dividend-paying companies. As a dividend investor myself, buying stocks that are part of the S&P 500 is not all that important to me. However, investing in a company that has shown steady dividend growth rates by consistently raising their dividends for over 25 years is.

Dividend Champion Stocks Recap

  • Stocks traded in the US
  • Increased dividends for 25 consecutive years
  • No minimum trading volume
  • Updated monthly
  • Free for investors to use

For more information on the list of stocks, check out – U.S. Dividend Champions.

Another difference between the Dividend Aristocrats and the Dividend Champions list is how often they are updated. The Aristocrats are updated once at the end of each year. A company that freezes or cuts its dividend during the year potentially may not be removed from the list for several more months.

The Dividend Champions, on the other hand, are updated monthly.

Helpful Dividend Data

In addition to the list of stocks, the dividend champion publication includes a ton of helpful financial data to help investors. For example, I can tell that one of my current holdings (Cincinnati Financial – CINF) has raised its dividend for the past 58 years!

I can also tell that the last dividend increase was 4.7%. This is something I could certainly calculate on my own. However, calculating the last increase for all 18 of my holdings would take some time. I can quickly use the dividend champion list to scan this information to monitor my current holdings.

In summary, the list of Dividend Champions is a great resource for investors. It can provide a starting point for investors looking for their next stock pick. I have found it to be an excellent tool that can uncover new investment options for my portfolio.

The Dividend Champions list has also saved me a lot of hours when it comes to monitoring my current holdings. The monthly updates to the list and the relevant financial data for each company allows me to quickly monitor my current stocks.

Final Thoughts on Aristocrats & Champions

The S&P 500 Dividend Aristocrats index is made up of some of the best income producing stocks available to investors. While the yields may seem low compared to other high yielding stocks, the companies found on this list tend to be stable and dependable. Most successful income investors use this index as a tool to help screen potential investments.

As with any other investment, an income investor should not treat this list as a signal to buy each member. Instead, the list should serve as an investment tool that is used in combination with other analysis and criteria. The Dividend Aristocrats are an excellent place to start your search for great companies that can help you build a steady income stream.

The same can be said of the Dividend Champions list, or any similar list. These are best used as a screening tool and a starting point.

Just be sure to use it with caution and always do your own due diligence before making any investment decision.

Do you use the list of Dividend Aristocrats as an investment tool for finding high-quality income stocks? What other criterion do you use to screen your dividend stocks?

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About John Schroeder

John Schroeder writes about investing and other topics at The Money Sprout where he shares his goals on how to create passive streams of income so he can spend more time doing the things he enjoys, and less time working.

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  1. Chris Dent says

    They really are doing people a disservice if the stocks they recommend for income only pay 2.5%. With just a little more research, you can find reliable stocks with nearly double that yield.

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