What Is A Dividend Aristocrat
A dividend aristocrat is a company that has raised and paid a dividend every year for 25 years. This is a wonderful achievement, outshone only by a dividend king who has managed it for 50 years.
This applies to US companies. The definition is a little laxer for UK companies, more on that shortly.
Take a guess how many US companies hold the title…
A whopping 66 companies in the S&P 500 hold the title of being a dividend aristocrat. Did that number surprise you?
You have to factor in all that has gone wrong over the last 25 years from wars to stock market crashes, housing market crashing etc..
For a company to not only maintain paying its dividend through these times but increase it is nothing shorting of outstanding.
A few other technicalities must be met to achieve the status but rest assured if they have hit the 25 year mark of raising their dividend the other requirements will almost certainly have been met.
The requirements are as follows.
- Increased its dividend payouts for a minimum of 25 consecutive years
- Be part of the S&P 500 index,
- Have a minimum market capitalization of $3 billion.
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What Are Some Examples Of Dividend Aristocrats
I can do better than that. Here is a list of all the dividend aristocrats in the S&P 500. I am willing to bet that you have heard of at least 30% of them even from our side of the pond.
| Company | Dividend Yield | Annual Payout | Payout Ratio | 3-Year Dividend Growth | P/E Ratio |
|---|---|---|---|---|---|
| 3M | 3.86% | $5.88 | 73.32% | 414.29% | 18.21 |
| A. O. Smith | 2.04% | $0.96 | 54.55% | 650.00% | 23.30 |
| Abbott Laboratories | 1.64% | $1.44 | 49.66% | 93.94% | 44.08 |
| AbbVie | 5.12% | $4.72 | 45.34% | 0.00% | 16.39 |
| AFLAC | 3.12% | $1.12 | 25.81% | 1,389.66% | 9.18 |
| Air Products & Chemicals | 2.29% | $5.36 | 63.36% | 553.52% | 26.83 |
| Archer Daniels Midland | 3.73% | $1.44 | 51.25% | 600.00% | 14.29 |
| AT&T | 6.89% | $2.08 | 64.60% | 4.35% | 15.38 |
| Automatic Data Processing | 2.55% | $3.64 | 63.53% | 937.15% | 26.77 |
| Becton Dickinson and | 1.36% | $3.16 | 30.15% | 792.09% | 69.33 |
| Brown-Forman | 1.06% | $0.70 | N/A | 0.00% | 37.02 |
| Cardinal Health | 3.64% | $1.92 | 36.43% | 2,779.40% | -3.72 |
| Caterpillar | 3.36% | $4.12 | 86.74% | 504.80% | 12.98 |
| Chevron | 5.77% | $5.16 | N/A | 283.87% | 44.53 |
| Chubb | 2.46% | $3.00 | 30.64% | 132.81% | 15.38 |
| Cincinnati Financial | 4.08% | $2.40 | 69.97% | 229.41% | 210.43 |
| Cintas | 0.97% | $2.55 | 31.95% | 1,638.64% | 29.84 |
| Clorox | 2.06% | $4.24 | 61.81% | 431.58% | 30.12 |
| Coca-Cola | 3.60% | $1.64 | 88.17% | 400.00% | 19.69 |
| Colgate-Palmolive | 2.41% | $1.76 | 61.32% | 479.66% | 25.07 |
| Consolidated Edison | 4.10% | $3.06 | 71.00% | 38.32% | 19.83 |
| Dover | 2.04% | $1.96 | 40.33% | 340.91% | 19.22 |
| Ecolab | 0.93% | $1.88 | 38.76% | 750.57% | 39.73 |
| Emerson Electric | 3.31% | $2.00 | 67.57% | 195.68% | 17.48 |
| Exxon Mobil | 7.54% | $3.48 | N/A | 310.78% | 18.97 |
| Federal Realty Investment Trust | 4.80% | $4.20 | 162.16% | 132.58% | 20.98 |
| Franklin Resources | 5.16% | $1.08 | 56.84% | 1,300.00% | 10.78 |
| General Dynamics | 2.96% | $4.40 | 39.11% | 748.94% | 12.78 |
| Genuine Parts | 3.78% | $3.16 | 73.49% | 193.27% | 20.72 |
| Hormel Foods | 1.98% | $0.93 | 56.02% | 918.18% | 28.02 |
| Illinois Tool Works | 2.58% | $4.28 | 80.75% | 1,154.55% | 21.91 |
| Johnson & Johnson | 2.87% | $4.04 | 52.40% | 588.07% | 19.55 |
| Kimberly Clark | 3.12% | $4.28 | 57.22% | 296.15% | 20.29 |
| Leggett & Platt | 4.77% | $1.60 | 129.03% | 338.89% | 15.25 |
| LINLinde | 1.93% | $3.85 | 50.86% | 0.00% | 46.77 |
| Lowe’s Companies | 1.77% | $2.20 | 33.95% | 6,766.67% | 21.98 |
| MCCORMICK & CO /SH | 1.48% | $2.48 | 47.51% | 565.71% | 32.70 |
| Mcdonald’s | 2.67% | $5.00 | 89.29% | 2,325.64% | 24.51 |
| Medtronic | 2.36% | $2.16 | 47.06% | 1,362.07% | 25.86 |
| Nucor | 4.05% | $1.61 | 94.15% | 1,132.69% | 15.40 |
| Pentair | 2.05% | $0.76 | 36.89% | 125.00% | 16.79 |
| People’s United Financial | 6.17% | $0.72 | 66.67% | N/A | 10.07 |
| PepsiCo | 3.20% | $4.09 | 77.02% | 608.88% | 24.92 |
| PPG Industries | 2.05% | $2.04 | 45.13% | 160.53% | 22.16 |
| Procter & Gamble | 2.72% | $3.16 | 63.58% | 388.41% | 67.31 |
| Roper Technologies | 0.52% | $2.05 | 16.80% | 1,323.08% | 25.46 |
| S&P Global | 0.87% | $2.68 | 26.83% | 324.19% | 33.69 |
| Sherwin-Williams | 0.98% | $5.36 | 26.76% | 841.67% | 31.77 |
| Stanley Black & Decker | 2.15% | $2.76 | 54.87% | 210.34% | 22.37 |
| SYSCO | 3.37% | $1.80 | 75.63% | 940.00% | 20.69 |
| T. Rowe Price Group | 3.00% | $3.60 | 52.71% | 1,313.95% | 15.22 |
| Target | 2.24% | $2.64 | 52.91% | 1,200.00% | 22.06 |
| United Technologies | 4.30% | $2.94 | 88.29% | 525.53% | 10.66 |
| VF | 3.20% | $1.92 | 71.64% | 808.24% | 36.24 |
| W W Grainger | 1.87% | $5.76 | 41.03% | 801.59% | 22.27 |
| Walgreens Boots Alliance | 4.49% | $1.83 | 33.46% | 0.00% | 11.35 |
| Walmart | 1.80% | $2.16 | 43.81% | 960.00% | 22.93 |
Should I Invest In Dividend Aristocrats
Impressive is it not. But now what? Should we just stick to investing in dividend aristocrats? Many do just this.
Whilst typical the dividend yields are a little lower, they are obviously very secure dividend-paying stocks if not a little boring.
These are the sorts of companies that have been around forever and likely always will be, more often than not selling mundane products and services.
Currently, within my portfolio I hold 7 US dividend aristocrats. In the future, this may include a couple more as my portfolio matures (and maybe me) and I am wanting to reduce my risk somewhat.
How many do you own? Every dividend growth portfolio should have its fair share of aristocrats in it. Not only this they should also be your larger positions in my opinion as they give you at least some security.
I use the term security loosely but you catch my drift.
Do not expect strong growth on the share price or dividend but over the long term, most of my dividend aristocrat positions are doing very well. Often with compound annual dividend growth rates above 7%.
Modest growth to low consistent growth is the aim of the game here.
Keep track of your dividends and your portfolio as a whole with my dividend tracking spreadsheet.
What Is A UK Dividend Aristocrat
A UK dividend aristocrat is not the same as a US one. US companies place a heavy emphasis on paying and raising their dividend year after year. Not so much in the UK unfortunately.
For a UK company to become a dividend aristocrat then they have to just maintain or increase its dividend payment for 7 years. This is in stark contrast to the 25 year streak of increases needed for the US.
In my opinion, even 7 years of paying or increasing the dividend is still pretty impressive but obviously pales in comparison to the US.
The only other factor for UK aristocrats is they must be in the top 40 of the highest paying dividend stocks contained within the S&P Europe Broad Market Index (BMI).
For US companies, however, the actual yield is irrelevant as long as the dividend increases year on year.
Also how much the dividend is increased by each year is not limited. They could do an increase of 0.05% and it would still count.
Should this make you more weary of UK aristocrats?
Hmm…. maybe.
If you are adopting a strict dividend growth approach then you might be put off by investing in the UK.
It is not that simple however, the way I look at it is this.
Investing in the UK is great because the money goes back into our economy rather than the US. Not only this we do not have to pay any tax on our dividends as long as we are using a stocks and shares ISA.
If you are not sure what I am talking about then you must read Trading 212 Invest vs ISA where I outline the benefits and drawbacks of the ISA.
Getting hit with a 15% withholding tax on US dividends does sting a little though I must admit. That withholding tax offsets some of the downsides of UK companies tendencies to not honour the dividend as much as the US.
On the flip side, the strong growth of those US companies means we have to suffer that blow for the greater good. Having a diversified portfolio not only into each sector but across both the UK and the US is of the utmost importance in my humble opinion.
Conclusion
I think you will agree that having a backbone of dividend aristocrats in your portfolio will serve us well now and into the future.
Nobody can say what the future will hold. These companies will at least do their damndest to keep rewarding us with those sweet dividend increases though. That goes for US aristocrats at least.
Let me know in the comments what if any aristocrats you hold in your portfolio, I would love to know.
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None of the above should be used as financial advice, I am not a professional. Always do your own research.
Thanks,
Sean
