Value Investing

25 Year Review Of Dividend Aristocrats: Why Companies Fell Off The List

25 Year Review Of Dividend Aristocrats: Why Companies Fell Off The List by Sure Dividend

There were 26 Dividend Aristocrats in 1989. Of these 26, 5 were removed from acquisitions, 6 were removed due to not increasing their dividends, 4 were removed due to reducing dividend, 7 are still on the list, and 4 were removed for unknown reasons.

Acquisitions

TickerNameYear RemovedAcquiring Firm
CSRCentral & Southwest Corporation1998American Electric Power
HIHousehold International2003HSBC
RBDRubbermaid1999Newell
WLAWarner-Lambert2000Pfizer
AMPAMP Inc.1999Tyco

No Dividend Increase

TickerNameYear Removed
AHPAmerican Home Products (changed to Wyeth in 2002)2002
KKellogg2003
LDGLongs Drug Stores1995
PHParker-Hannifin Corp.1990
WINWinn-Dixie2000
TXUTexas Utilities Company1995

Reduced Dividend

TickerNameYear Removed
BAXBaxter International Inc.1998
FPLFlorida Power & Light (Changed to NextEra Energy: NEE)1995
IFFInternational Flavors & Fragrances2001
NSINational Service Ind.1999

Still on List

TickerName
DOVDover Corp.
EMREmerson Electric
JNJJohnson & Johnson
KOCoca-Cola
LOWLowe’s Companies
MMM3M
PGProcter & Gamble

Reason for Removal Unknown

TickerNameYear Removed
CLColgate-Palmolive1990
GPCGenuine Parts Company2002
MASMasco Corporation1996
TMKTorchmark Insurance1996

Review of Unknown Category

CL & GPC have raised their dividend every year since their inclusion on the dividend aristocrats list in 1989 per Yahoo! Finance. Colgate-Palmolive’s investor relations claims that they have not reduced dividend payments in this time period. CL & GPC were both re-added to the dividend aristocrats lists in 2012. If you include CL & GPC, 9 businesses out of 26 would have paid uninterrupted dividends to shareholders since 1989.

Masco Corporation was removed from the list in 1996 despite increasing its dividend. It should have been removed from the list much later, in 2009, when it reduced its dividend. Why it was removed in 1996 is a mystery.

Torchmark was removed from the list in 1996, despite increasing its dividend for the year. It should have been removed much later, in 2006 when it froze its dividend. The business has not cut its dividend since being included on the dividend aristocrat list to this present day.

No Dividend Increase Review

American Home Products/Wyeth froze its dividend from 2000 through 2004. From 2005 to 2009, the business resumed paying increasing dividends. If you did not sell on the freeze, American Home Products/Wyeth was acquired by Pfizer in 2009.

Kellogg (K) froze its dividend from 2001 through 2004. It has since paid increasing dividends every year since.

I do not have sufficient data on Longs Drug Stores to know if they continued paying the same annual dividend up until the company’s acquisition in 2008 by CVS. If you have data on this, please let me know and I will update accordingly.

Parker-Hannifin’s did not increase its dividend in 1989, and was removed from the index in 1990. The business has waited 2 years to increase its dividend several times, but has not reduced the dividend since being included to the dividend aristocrat index in 1989.

Winn-Dixie froze its dividend in 1999. It decreased its dividend in 2001, and declared bankruptcy in 2005.

Texas Utilities Company froze its dividend in 1994, and reduced it in 1995.

Big Picture Review

  • 7 businesses are still on the list from 1989 (DOV, EMR, JNJ, KOW, LOW, MMM, PG)
  • 2 businesses should still be on the list from 1989 (CL, GPC)
  • 3 businesses have increased dividends most years without ever reducing dividend (PH, K, TMK)
  • 6 businesses were acquired (CSR, HI, RBD, WLA, AMP, AHP). AHP had frozen its dividend before being acquired
  • 1 business froze its dividend, and I don’t have sufficient data to see if dividend was decreased before being acquired by CVS in 2008 (LDG)
  • 7 businesses reduced dividend (BAX, FPL, IFF, NSI, WIN, TXU, MAS). WIN & TXU froze dividend before reducing their dividend payment. MAS was removed prematurely, but reduced its dividend later

Out of 26 businesses, 18 have paid stable or increasing dividends, or were acquired. One froze dividend and I am not sure what happened afterwards due to insufficient data. 7 businesses reduced their dividend.

Having almost 70% of your stocks have favorable outcomes from 1989 to 2014 is a very high success rate. Investing in dividend aristocrat stocks reduces downside risk by forcing investors to seek stable businesses that return money to shareholders.

If you are interested in the historical returns of the 7 businesses that have remained on the dividend aristocrat list from 1989 to today, see this article.

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