The Dividend Aristocrats are a group of stocks that have been growing their dividend payouts so consistently and for so long that investors flock to them both for the income and the stability they provide. There are no guarantees, but if you’re looking to invest in stocks with a history of outperforming the market without rolling the dice on unknown quantities, the Dividend Aristocrats might be worth a look. They’re diversified across nearly a dozen sectors of the economy. They have an impressive record of delivering gains and weathering market turbulence — and they’re among the most familiar names in the corporate world.
What Are the Dividend Aristocrats?
“Dividend Aristocrats” is a nickname given to a select group of stocks listed on the S&P 500 Dividend Aristocrats index. Coveted for their stability and long records of growth over time, they’re all big, well-established U.S. corporations and, as the name suggests, they’re all dividend-paying stocks.
Also as the name suggests, not just any old stock can join the club. To earn a spot among the Aristocrats, each stock has to meet strict criteria — and no Aristocrat’s spot is safe. Any among them can be booted off the list the moment they fail to make the grade, and some years, new stocks qualify for Aristocrat status. There are currently 65 members in the fraternity.
How Does a Company Become a Dividend Aristocrat?
In order to become a Dividend Aristocrat, a stock must be listed on the S&P 500 index, which tracks the 500 largest U.S. corporations. To qualify, a company must have not only paid shareholders a dividend but increased its dividend payment every year for at least 25 consecutive years.
On top of that, it must have:
- A minimum float-adjusted market cap of $3 billion
- An average daily value traded of $5 million
It’s a very high bar that only a handful of stocks can achieve and even fewer can maintain over time.
The Aristocrats Are About More Than Just Dividends
While many of them can make good income stocks, the attraction to the Aristocrats by many smart and skilled investors goes beyond the dollar amount of the dividend payouts themselves. Companies that can endure the ups and downs of the market through decades of recessions, bubbles, crashes, corrections, wars and pandemics without ever failing to increase their dividends are rare and special. Only the biggest, best run, and most dominant corporations can go beyond a quarter-century without ever hitting a stretch where cash was so tight that bigger shareholder payouts just weren’t an option.
Are Dividend Aristocrats Safe?
There is, of course, no such thing as a guarantee in investing. But the Dividend Aristocrats are thought of as being safe even among the blue chips, which have long been considered as safe a bet that exists in the stock market. Since the Dividend Aristocrats are the most stable and entrenched companies on the S&P 500 — the benchmark most people are talking about when they refer to “the market” — they tend to outperform the S&P and the market as a whole. That goes both ways. The Dividend Aristocrats tend both to gain more when the market is up and lose less when the market is down.
Therefore, the Dividend Aristocrats have emerged as a sort of stock market all-star team, a best-of-the-best collection known for performance, security and, of course, dividend payouts.
And Finally, the List …
The following is the list of the current 2021 Dividend Aristocrats. They’re ranked by the number of years they’ve been increasing their dividends, starting with the longest. The top 10 have been increasing their annual dividends for more than 50 years. The absolute cream of the S&P 500 crop, they — and their more than a half-century of dividend growth — are known as the Dividend Kings.
|Genuine Parts Co.||GPC|
|Johnson & Johnson||JNJ|
|Procter & Gamble||PG|
|Stanley Black & Decker||SWK|
|Becton, Dickinson & Co.||BDX|
|Illinois Tool Works||ITW|
|Leggett & Platt||LEG|
|Federal Realty Investment Trust||FRT|
|Archer Daniels Midland||ADM|
|Automatic Data Processing||ADP|
|Walgreens Boots Alliance||WBA|
|Air Products & Chemicals||APD|
|McCormick & Co.||MKC|
|T. Rowe Price Group||TROW|
|Atmos Energy Corp.||ATO|
|West Pharmaceutical Services Inc.||WST|
|A. O. Smith||AOS|
|People’s United Financial||PBCT|
|Essex Property Trust Inc.||ESS|
|Expeditors International of Washington Inc.||EXPD|
|Realty Income Corp.||O|
|International Business Machines Corp.||IBM|
|NextEra Energy Inc.||NEE|
|Source: The Motley Fool|
2021 Welcomed Some New Aristocrats and Bid Farewell to Others
The list doesn’t have much turnover, but once a year in January, membership is reevaluated by the S&P Dow Jones Indices, which owns the S&P 500 index. In 2021, however, there were some significant changes as three iconic members of the old guard fell off the list just as three new stocks qualified for Aristocrat status.
The following stocks were removed from the list:
- Carrier Global Corp. (CARR)
- Otis Worldwide Corp. (OTIS)
- Raytheon Technologies Corp. (RTX)
These stocks are the newest members of the Dividend Aristocrats:
- International Business Machines Corp. (IBM)
- NextEra Energy (NEE)
- West Pharmaceutical Services (WST)
Is There a Dividend Aristocrats ETF?
The ProShares S&P 500 Dividend Aristocrats ETF (NOBL) is the only U.S.-based exchange-traded fund that tracks the index. Its expense ratio is an unimpressive 0.35%, but it buys you a position in all 65 stocks across all 11 sectors and automatically makes adjustments when new Aristocrats come and old ones go.
NOBL’s Top Holdings
The ETF does not hold equal amounts of all 65 Dividend Aristocrats. NOBL’s biggest positions are in these 10 stocks:
- People’s United Financial
- Cincinnati Financial
- A. O. Smith
- General Dynamics
- Genuine Parts Co.
- Federal Realty Investment Trust
- Automatic Data Processing
Only you know whether the Dividend Aristocrats are a good investment for you — and if you don’t know, a chat with a professional would be a good place to start. Either way, the Dividend Aristocrats have a long and impressive track record of beating the market, weathering financial turbulence, and, of course, paying dividends.