A stock must meet the following criteria to be a Dividend Aristocrat:
- Be in the S&P 500
- Have 25+ consecutive years of dividend increases
- Meet certain minimum size & liquidity requirements
There are currently only 50 Dividend Aristocrats. You can download an Excel spreadsheet of all 50 (with metrics that matter) by clicking the link below:
You can see detailed analysis on all 50 further below in this article. Analysis includes valuation, growth, and competitive advantage(s).
The downloadable Dividend Aristocrats Excel Spreadsheet List below contains the following for each stock in the index:
- 10 Year historical price-to-earnings ratio
- Stock price standard deviation
- Price-to-earnings ratio
- Expected total return
- Modified PEG ratio
- Dividend yield
- Growth rate
All Dividend Aristocrats are high quality businesses based on their long dividend histories. But not all Dividend Aristocrats make equally good investments…
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.
This article examines the characteristics and performance of the Dividend Aristocrats in detail A table of contents for easy navigation is below.
Table of Contents
- Sector Overview
- Dividend Aristocrats Analysis (The Dividend Aristocrats In Focus Series)
- Historical Dividend Aristocrats List (1989 – 2015)
- Final Thoughts
The Dividend Aristocrats Index has outperformed the market by a wide margin over the last decade – with lower volatility.
Source: S&P Fact Sheet
The performance of the Dividend Aristocrats by calendar year versus the S&P 500 is shown in the image below:
The Dividend Aristocrats index has produced excellent risk-adjusted returns over the last decade. The index’s annualized risk-adjusted returns are far in excess of the S&P 500’s over the last decade.
Higher total returns with lower volatility is the ‘holy grail’ of investing. It is worth exploring the characteristics of the Dividend Aristocrats in detail to determine why they have performed so well.
Note that a good portion of the outperformance relative to the S&P 500 comes during recessions (2000 – 2002, 2008). Dividend Aristocrats have historically seen smaller drawdowns during recessions. This makes holding through recessions that much easier.
Great businesses with strong competitive advantages tend to be able to generate stronger cash flows during recessions. This allows them to gain market share while weaker businesses fight to stay alive.
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:
- A company that pays dividends is likely to be generating earnings or cash flows so that it can pay dividends to shareholders.
- 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 believe 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.
A sector breakdown of the Dividend Aristocrats index is shown below:
Source: S&P Fact Sheet
The top 3 sectors by weight in the Dividend Aristocrats are Consumer Staples, Industrials, and Health Care. The weight of these sectors in the S&P 500 is shown below for comparison:
- Consumer Staples: 9.4%
- Industrials: 10.3%
- Health Care: 13.6%
The Dividend Aristocrats Index is tilted toward Consumer Staples and Industrials relative to the S&P 500.
It is also significantly underweight the Information Technology sector.
The IT sector comprises 20.8% of the S&P 500, and just 2.3% of the Dividend Aristocrats Index.
The Dividend Aristocrats Index is similar to Warren Buffett’s dividend holdings; underweight technology, overweight high quality established businesses in stable industries.
The Dividend Aristocrat Index is filled with stable ‘old economy’ consumer products businesses and manufacturers; the 3M’s (MMM), Coca-Cola’s (KO), and Johnson & Johnson’s (JNJ) of the investing world. These ‘boring’ businesses aren’t likely to generate 20%+ earnings-per-share growth, but they also are very unlikely to see large earnings drawdowns as well.
The Dividend Aristocrats In Focus Analysis Series
You can see analysis on every single Dividend Aristocrat below. Dividend Aristocrats are sorted by GICS sectors and listed in alphabetical order by name:
Note: The Dividend Aristocrats in Focus series for 2016 was finished on November 23rd. The series starts in October every year.
- Archer-Daniels-Midland (ADM)
- Brown-Forman (BF-B)
- Colgate-Palmolive (CL)
- Clorox (CLX)
- Coca-Cola (KO)
- Hormel Foods (HRL)
- Kimberly-Clark (KMB)
- McCormick & Company (MKC)
- PepsiCo (PEP)
- Procter & Gamble (PG)
- Sysco Corporation (SYY)
- Wal-Mart (WMT)
- Walgreens Boots Alliance (WBA)
- Cintas (CTAS)
- Dover (DOV)
- Emerson Electric (EMR)
- Illinois Tool Works (ITW)
- 3M (MMM)
- Pentair (PNR)
- Stanley Black & Decker (SWK)
- W.W. Grainger (GWW)
- Abbott Laboratories (ABT)
- AbbVie (ABBV)
- Becton, Dickinson & Company (BDX)
- C.R. Bard (BCR)
- Cardinal Health (CAH)
- Johnson & Johnson (JNJ)
- Medtronic (MDT)
- Genuine Parts Company (GPC)
- Leggett & Platt (LEG)
- Lowe’s (LOW)
- McDonald’s (MCD)
- Target (TGT)
- V.F. Corporation (VFC)
- Aflac (AFL)
- Cincinnati Financial (CINF)
- Franklin Resources (BEN)
- S&P Global (SPGI)
- T. Rowe Price Group (TROW)
- Air Products and Chemicals (APD)
- Ecolab (ECL)
- PPG Industries (PPG)
- Sherwin-Williams (SHW)
- Nucor (NUE)
Historical Dividend Aristocrats List (1989 – 2015)
There are currently 50 Dividend Aristocrats. Companies are added/removed most years.
The image below shows the history of the Dividend Aristocrats Index from 1989 through 2015:
Note: CL, GPC, and NUE were all removed and re-added to the Dividend Aristocrats Index through the historical period analyzed above. I am unclear as to the reasoning behind this.
This information was compiled from the following sources:
Interested in why companies were removed from the Dividend Aristocrats Index?
Take a look at this article for a review of why companies fell off the list.
You can see the (amazing) 25 year historical performance of the Top 9 Dividend Aristocrats here.
There is nothing magical about the Dividend Aristocrats Index.
It is a collection of high quality shareholder friendly businesses that have strong competitive advantages.
Purchasing this type of business at fair or better prices and holding for the long-run will likely result in favorable long-term performance.
You have a choice in what type of business you buy into. You can buy into the mediocre, or the excellent.
Often, excellent businesses are no more expensive (based on their price-to-earnings ratio) than mediocre businesses.
“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.” – Warren Buffett
Article by Sure Dividend