Updated July 5th, 2016

The Dividend Aristocrats Index is comprised of 50 stocks that have paid dividends for 25+ consecutive years.

Already know about Dividend Aristocrats? Click here to download your Dividend Aristocrats Excel Spreadsheet now.

You can quickly find the Top 10 Dividend Aristocrats using The 8 Rules of Dividend Investing by downloading this exclusive PDF. Keep reading this article to learn more about Dividend Aristocrats.

What is a Dividend Aristocrat?

A Dividend Aristocrat is a stock that has paid dividends for 25+ consecutive years, and:

  1. Is member of the S&P 500 Index
  2. Meets certain size and liquidity requirements.

The Dividend Aristocrats Index has outperformed the market by a wide margin over the last decade.

July Dividend Aristocrats ListSource:  S&P Dividend Aristocrats Fact Sheet

Sector Overview of Dividend Aristocrats

It’s interesting to note that the Dividend Aristocrats index is overweight consumer products companies, industrial, and health care.  A sector breakdown of the Dividend Aristocrats index is shown below:

Dividend Aristocrats Sector Breakdown

Source:  S&P Dividend Aristocrats Fact Sheet

List of All 50 Dividend Aristocrats

The free spreadsheet below lists all 50 Dividend Aristocrats as of January 2016.

The list can be sorted by:

  • Dividend Yield
  • Standard Deviation
  • Growth Rate
  • Payout Ratio
  • And more…

 

The financial metrics included in the spreadsheets are the same metrics used for the buy rules in The 8 Rules of Dividend Investing, including:

  • Dividend yield
  • Standard deviation
  • Growth rate
  • Payout ratio
  • Total return
  • Price-to-earnings ratio
  • 10 Year historical price-to-earnings ratio
  • Modified PEG ratio

A brief explanation of the less well0know metrics is below.

Standard Deviation
Standard deviation in the spreadsheet above is calculated over a stock’s 10 year price history (when available).  Long-term price histories are used to reduce the effects of unusually high or low volatility in the recent past.

Stocks with low price standard deviations have historically outperformed the market.  Better price returns have come with lower ‘risk’ as defined by academics due to lower stock price standard deviation.

I don’t believe standard deviation to be a true measure of risk, but it is a good proxy for measuring real risk.  It has worked to improve returns historically.  The historical record should not be ignored.

Total Return
Total return is a calculated as a stock’s dividend yield plus its expected growth rate.  The higher the total return, the better.  Click here to learn more about total returns.

10 Year Historical P/E Ratio
This is the historical average P/E ratio over the last decade (when available).  If less than 10 years of data are available (as is the case with ABBV, ABT, and SPGI due to spin-offs), the maximum amount of years available is used.  Comparing the historical P/E ratio to the current P/E ratio is a quick way to get a ‘ballpark estimate’ of if a company is currently overvalued or undervalued.

Modified PEG
PEG stands for price-to-earnings-to-growth.  The PEG ratio is calculated as P/E Ratio divided by (Growth Rate x 100).  It shows the relative value of a company in relation to its growth rate.  The modified PEG ratio uses total return instead of growth rate; it takes into account the effects of dividends.  The modified PEG ratio is calculated as P/E Ratio divided by (Total Return x 100).  The lower the PEG, the better.  Click here to learn more about the Modified PEG Ratio.

Why Have Dividend Aristocrats Outperformed?

The Dividend Aristocrats Index has trounced the market over the last decade.

I believe dividend paying stocks outperform non dividend paying stocks for two reasons:

  1. A company that pays dividends is likely to be generating earnings or cash flows so that it can pay dividends to shareholders.
  2. A business that pays consistent dividends must be more selective with the growth projects it takes on because a portion of its cash flows are being paid out as dividends.  Scrutinizing over capital allocation decisions likely adds to shareholder value.

I suggest that Dividend Aristocrats have historically outperformed the market and other dividend paying stocks because they are, on average, higher quality businesses.

A high quality business should outperform a mediocre business over a long period of time, all other things being equal.

For a business to increase its dividends for 25+ consecutive years, it must have or at least had in the very recent past a strong competitive advantage.

The Dividend Aristocrats Are Highly Profitable Industry Leaders

Of the 50 Dividend Aristocrats, 19 (38%) are the largest by market cap in their respective industries.  39 of the 50 ( 78%) Dividend Aristocrats are one of the top 3 largest companies in their industries.

The companies in the Dividend Aristocrat Index are generally larger than their peers.  Intuitively, this makes sense. If a company has grown for 25 or more years, it is most likely going to be well established in its industry.

The businesses in the Dividend Aristocrats Index have another distinguishing feature – they are highly profitable.

  • Median return-on-assets for S&P 500 stocks:  5.3%
  • Median return-on-assets for Dividend Aristocrat stocks:  8.0%

Further, 19% of the stocks in the S&P 500 have a return on assets over 10%, while 36% of stocks in the Dividend Aristocrats Index have a return on assets over 10%.

The Dividend Aristocrats Series

The Dividend Aristocrats list Excel spreadsheet download in this article is a quick-and-easy way to generate investment ideas for dividend growth investors.

Sure Dividend analyzes all 50 Dividend Aristocrats in detail once a year.

The most recent analysis is from October 2015 through January 2016.  Links to each and every Dividend Aristocrat analysis are below:

Click here to download a free PDF of the Top 10 Dividend Aristocrats as ranked by The 8 Rules of Dividend Investing.