Investors who are looking for quality stocks that regularly raise dividends have several lists available as a starting point in their research. The typical lists include the S&P Dividend Aristocrats index, which consists of 50 constituents of the S&P 500 which have raised distributions for over a quarter of a century and also have certain capitalization, liquidity requirements. Another popular list includes the Dividend Achievers Index, which includes almost all companies traded on US exchanges which have consistently raised distributions for over one decade, and which also meet a certain liquidity threshold as well. The third list, the dividend champions, is maintained by Dave Fish. This is by far the most comprehensive list of dividend growth stocks available for free. It breaks down the dividend growth universe into dividend champions, dividend contenders and dividend challengers. The list could be obtained from this link.
The dividend champions list includes all stocks traded in the US, which have raised dividends for at least twenty-five consecutive years. I prefer the dividend champions list than the dividend aristocrats index, since it is more complete and does not have artificial requirements such as index membership or minimum trading volume. These requirements are typically irrelevant to long-term dividend investors, who focus on fundamentals that could support a growing distribution, not on day to day market fluctuations. Currently there are 110 dividend champions, which yield 2.46% on average.
Some notable dividend champions include Colgate-Palmolive (CL), Procter & Gamble (PG) and Coca-Cola (KO). Colgate-Palmolive (CL) has consistently raised dividends for 53 years in a row, but for some strange reason was not included in the dividend aristocrats index until 2012. This is a great example why focusing on the dividend champions list could provide a more comprehensive selection of elite dividend stocks. Another dividend champion is Altria Group (MO). The only reason why the company is not on the dividend aristocrat list is because its dividend payment is lower due to the spin-off of Phillip Morris International (PM) in 2008 and Kraft Foods (KFT) in 2007. Other than that, the tobacco company has managed to increase dividends for 47 years in a row.
The dividend contenders list consists of all publicly traded stocks in the US, which have raised distributions for over one decade, but less than 25 years. This list is similar to the dividend achievers index. In a previous study of the dividend achievers index, where I focused on the 1991 additions, I noted that almost 10% of companies that raise distributions for a decade will keep raising them for the next two decades. Most of the companies that end up on this list have gone through several economic cycles and kept growing distributions, which is the type of consistently positive feedback dividend income investors like in any market. Currently there are 239 contenders, yielding 2.78% on average. Some notable contenders include Verizon (VZ), Realty Income (O) and United Technologies (UTX). Verizon has raised distributions for 11 years in a row, while United Technologies (UTX) has delivered 23 years of consecutive dividend increases to its shareholders. Realty Income (O) on the other hand has only raised distributions for 23 years in a row.
The dividend challengers list includes companies which have raised dividends for at least five years in a row. Most of the companies on this list would probably stop growing distributions sometime before hitting the tenth year of dividend growth, particularly if it was a function of the companies being at the right place at the right time. However there is a big chance that this list includes the next dividend king like Procter & Gamble (PG), which would raise distributions for the next 50 years. Currently there are 441 dividend challengers with an average yield of 2.89%.
Some notable dividend challengers include Hershey (HSY), Visa (V) and Walt Disney Company (DIS). Visa has managed to boost its dividends for eight consecutive years, while Hershey has increased dividends for seven years in a row. Disney has rewarded shareholders with a raise for six years in a row.
In summary, I use the dividend champions spreadsheet in order to uncover hidden dividend gems. It is the most comprehensive tool available to dividend growth investors, as it consists of more constituents than the total number of members of the dividend aristocrats and the dividend achievers indexes combined.
Full disclosure: Long CL, PG, KO, MO, PM, MDLZ, KHC, VZ, O, UTX, HSY, V, DIS