You may have seen this term thrown about when referencing specific stocks, but what exactly is a dividend aristocrat? Simply put, a dividend aristocrat is traditionally a company in the S&P 500 index that has paid and increased its dividend payments for at least 25 consecutive years. These are the companies you should at least consider for a dividend stock-focused investment portfolio.
While being a dividend aristocrat doesn’t automatically make a company safe to invest in, it does paint a good picture from management about how sure it is about future growth. If a company isn’t growing at a large enough pace to warrant dividend hikes, you’ll likely want to look elsewhere or at least reconsider them.
The S&P Dow Jones Indices compiles a list each year of all the qualifying Dividend Aristocrats in the U.S. market. I’ve compiled a list below of these companies, in order of consecutive year increments.
|Company||Ticker||Sector||# of Consecutive Years||Dividend Yield|
|Johnson & Johnson||NYSE:JNJ||Healthcare||57||2.72%|
|Procter & Gamble||NYSE:PG||Staples||57||2.29%|
|Stanley Black & Decker||NYSE:SWK||Industrials||52||1.75%|
|Becton, Dickinson & Co.||NYSE:BDX||Healthcare||48||1.35%|
|Illinois Tool Workds||NYSE:ITW||Industrials||48||2.35%|
|Leggett & Platt||NYSE:LEG||Discretionary||48||3.79%|
|Federal Realty Investment Trust||NYSE:FRT||Real Estate||47||5.17%|
|Archer Daniels Midland||NYSE:ADM||Staples||45||3.10%|
|Automatic Data Processing||NASDAQ:ADP||Technology||45||2.63%|
|Walgreens Boots Alliance||NASDAQ:WBA||Staples||44||5.07%|
|Air Products & Chemicals||NYSE:APD||Materials||37||1.80%|
|McCormick & Co.||NYSE:MKC||Staples||34||0.90%|
|T. Rowe Price Group||NASDAQ:TROW||Financials||33||2.72%|
|Atmos Energy Corporation||NYSE:ATO||Utilities||32||2.37%|
|People’s United Financial||NASDAQ:PBCT||Financials||26||6.53%|
|Carrier Global Corp||NYSE:CARR||Industrials||26||1.07%|
|Otis Worldwide Corp||NYSE:OTIS||Industrials||26||1.30%|
|Raytheon Technologies Corp||NYSE:RTX||Industrials||26||3.11%|
|Essex Property Trust Inc||NYSE:ESS||Real Estate||25||3.71%|
|Expeditors International of Washington, Inc||NASDAQ:EXPD||Industrials||25||1.18%|
|Realty Income Corporation||NYSE:O||Real Estate||25||4.30%|
|Ross Stores, Inc||NASDAQ:ROST||Discretionary||25||0.86%|
How does a company become a dividend aristocrat?
It’s not good enough for a company to simply increase its dividend output for 25 consecutive years. There are some other requirements. In order for a company to have its position cemented in the list of dividend aristocrats, it needs to meet the following strict requirements:
- Be a member of the S&P 500 (meeting its requirements).
- Increase its per-share dividend each year for at least 25 consecutive years.
- Have a market cap of at least $3 billion.
- Average at least $5 million in daily share trading value for the three months prior.
All this takes time, dedication, and competent management. In order for a company to increase its dividends by at least 25 consecutive years, they need to be in a strong position. You’ll notice with the index that most of the dividend aristocrats are among the leaders in their field. It’s not a coincidence that this index requires you to have a good product or service.
There are plenty of stocks in this index, but it will never fall below 40 if companies start slashing dividends. Should it remove enough companies that the total number drops below 40, the next best stock is added that may only have 24 consecutive years of dividend growth. If more than one meets this lessened criteria, the one with the highest dividend payout is selected.
Should you invest in dividend aristocrats?
For dividend-focused investors: absolutely. It’s difficult to overlook just how powerful increasing your dividends for 25 years straight is for a dividend-driven portfolio. Dividend investors generally seek high, yet safe payouts from top companies and this club is full of worthy partners.
Not all the companies listed in the aristocrat table offer high dividend yields, but they’re often considered to be safer investments. It’s a good idea to mix well-established and safe companies with up and coming stocks to balance and diversify your portfolio.
You can not only find U.S. companies that fit this criterion, but also international companies too.