Dividend Aristocrats: Steady Growth, Solid Financials and Happy Shareholders
I recently read a special report from Patrick McKeough, editor of The Successful Investor, Stock Pickers Digest and Wall Street Stock Forecaster, celebrating 3M Company’s (MMM) landmark achievement of 100 years of dividend payments.
That’s a pretty remarkable event, wouldn’t you say? And it started me thinking about the hundreds of companies that have paid steady dividends for many decades, many of whom have also consistently increased their dividend payouts.
I know you’ve heard of the Dividend Aristocrats list—the S&P 500 companies that have increased their dividends for 25 straight years. These are primarily solid, blue chip businesses that manage to grow their sales and earnings, maintain their debt at a reasonable level, and keep their shareholders happy with nice dividends and market-beating price acceleration.
Dividend Aristocrats Outperform the Broad Market
The chart below shows that the S&P Dividend Aristocrats Index has enjoyed an annual return of 10.2% for the past decade—considerably better than the market’s 7.2% return. And to show you the importance of dividends, they accounted for some 31% of the market’s total return during that timeframe.
And in times of economic and market downturns, dividend stocks can help stabilize and protect your portfolio from disaster. For example, in 2008, the S&P 500 dropped by 37%. Yet dividend aristocrats—while they still declined—fell 22%, making it easier for investors to recover from their losses when markets began to rise following the economic crisis.
Dividend Aristocrats Are Diversified
The majority of the companies that have paid dividends for 25 consecutive years are in very stable industries. Consumer Staples companies account for about one-fourth of the list, with tech and telecom sectors at less than 2% each. That makes sense, as tech and telecom companies tend to be more volatile, with sales and earnings peaking and ebbing rather than steady growth. And that makes paying dividends more difficult. Having said that, though, there are scores of tech and telecom companies—such as Intel, Cisco, Micron, Garmin, T-Mobile, Vodafone, and Frontier—that have now survived and prospered for several decades. Many are now rewarding their shareholders with dividend payments.
Source: http://www.simplysafedividends.com/dividend-aristocrats/
Who are the Dividend Aristocrats?
Sure Dividends provides a list of the dividend aristocrats at http://www.suredividend.com/dividend-aristocrats-list/, which I have copied and edited in the table below (sorted by dividend yield).
Source: http://www.suredividend.com/dividend-aristocrats-list/
As you can see, they all the Dividend Aristocrats carry dividend yields of more than 2% and trade at fair values. I also included growth rates, to give you an idea of which companies might see their stocks propelled a bit faster as their sales and earnings continue to expand. Several companies have double-digit growth rates—and that might be a great place to start your analysis!
