Thursday, February 14, 2019

My Bet With Warren Buffett – Year One Results


Last year, I made a bet with Warren Buffett that I can select a group of stocks that can “beat the market”. This was inspired by Buffett’s previous bet with a hedge fund manager, which ran for a decade. Buffett made a bet that the hedge funds cannot do better than an index fund. And Buffett won the bet.

I believe that many investors did not understand why Buffett won the bet. There is a lot of idolizing of index funds, when their main weapon is the low cost nature and low turnover. As dividend growth investors, we have known this simple truth for decades, and taken full advantage of it. When you buy individual securities, you have a one time cost, followed by no charges in the future. In today’s day and age, you can purchase stocks for free, and not pay anything to hold on to them.

The real reason why the index funds did better was because they have lower costs and lower turnover compared to hedge funds. With my bet, I am going to show that you do not need to own index funds. You can do well even with a portfolio of individually selected stocks, as long as certain basic factors are taken into consideration. These factors include keeping costs low, keeping turnover low, and having a long-term focus.

For example, if an index fund held shares in Coca-Cola (KO), they would charge investors a small fee of 0.05% - 0.10%/year to held the stock through the wrapper. If a hedge fund held these shares for you, they would charge you a 2% fee per year, as well as 20% of any profits made on top of that. If the money is held in a fund of hedge funds, you are guaranteed to pay even more in fees. If you add in the potential for behavioral mistakes where you buy and sell Coca-Cola stock at inopportune times,( aka “timing the market”), you will do even worse than the investor who simply bought and held Coca-Cola stock. Of course, if you bought shares of Coca-Cola for your own account, without paying a commission and without paying a fee to anyone to hold the shares for you, you would come out ahead.

Ironically, many index investors would have also lost the bet to Warren Buffett. That’s because they don’t just own S&P 500 index funds in their portfolios. They also hold international stocks, emerging market stocks, commodity index funds and fixed income index funds to name a few asset classes. The commonly used asset allocation of equally weighting US Stocks, Foreign Stocks and US Bonds would have also lost the bet with Warren Buffett between 2007 and 2017.

If you paid a high fee to someone to select index funds for you, you will have lost the bet to Buffett as well. If you do costly rebalancing every year, you will incur extra costs that will reduce your returns and increase your tax liabilities.

I am going to shed some light on these factors, by making my own ten year bet with Buffett. Of course, Buffett is not really part of this bet, as this is mostly an intellectual exercise from an unknown do-it-yourself investor. I am pretty sure that Buffett doesn’t even know I exist.

I also included a few other bloggers in the bet in order to make it more interesting.

My main premise on doing this bet was to challenge some assumptions, and challenge labels such as “active” or “passive” etc. I am also challenging the incorrect statement that index investing is the only right way to invest. There aren’t any right or wrong investing methods. The best method of investing is the one that lets the individual hit their goals and objectives, and the one they can stick to through thick or thin. In my case it is Dividend Growth Investing, which has helped me achieve financial independence in a decade.

I also view this bet as a learning exercise, because of its nature. The learning exercise for me would be revising the original post and assumptions every single year, and determining assumptions that have changed since then. It is always helpful to write down reasons behind investments being made, in order to check up on the thesis in the future, and identify potential room for improvement. This is how I grow as an investor.

I am essentially selecting a group of companies that I cannot sell for a decade. This limitation makes me want to be careful about the type of investments I am selecting. After all, I want to select companies that have a high chance of being relevant in a decade, while also delivering great returns to investors over the next decade as well. This requirement also caused me to think in terms of portfolio construction and think about alternative scenarios in case companies get acquired, merged or split-off/spun-off divisions. Finally, I had to think about dividends and their reinvestment, as well as how to deal with acquisitions in cash. The nature of US business is very dynamic, which is why it is very possible that the list in 2027 will look very differently from the list in 2017.

To make it even more interesting, I wanted to select the companies for this 10 year bet in a way that is accessible for anyone that may be interested in investing. In other words, I wanted a list of companies that anyone can identify and select, without having to do any work and calculate any ratios or read a single page of annual reports.

This is why I selected the list of companies in the Dow Jones Industrials average as of the end of the year in 2017.

The 30 companies in Dow Jones Industrials Average are selected by a committee of journalists at WSJ and analysts from Standard & Poor’s. These individuals select blue chip companies that are representative of the US economy.

The performance of these 30 companies relative to S&P 500 and Total Stock Market index shows that you do not need thousands of stocks to be diversified. You can get a similar level of diversification with 30 – 60 securities that you can get with 500 or 3500 securities. Ironically, most capitalization weighted indices such as S&P 500 have at least half of their weight in the largest 50 securities. Which means that these securities have as much weight as the remaining 450.

Some investors believe that by buying these 30 companies, I am engaging in stock picking. Somehow the word “stock picking” is used with a negative connotation. I actually like it and embrace it. That because the people who choose to invest in S&P 500 over an index of international stocks or small company US stocks are essentially stock pickers, who are claiming that the 500 or 3500 companies they selected are better than other portfolio combinations. They are just picking indices, rather than stocks, while claiming moral superiority over others in the process.

I decided to equally weight all 30 of them, reinvest dividends automatically, and maintain the portfolio static. This means that I didn’t make any sales, even if the committee decides to delete a company, and replace it with another one. For example, the index committee did remove General Electric (GE) from the list in 2018, replacing it with Walgreen’s (WBA). As I stated in the original rules, I kept General Electric.

I assumed that the investor allocated each of these companies equally at the end of 2017.

Investors also believe that they should weight their investments based on free market float. Basically, companies with higher market capitalizations and a higher percentage of their shares outstanding that are not in insiders hands would have higher weightings. On the other hand, companies with low market capitalizations or companies with high level of insider ownership would have lower weights. If you do not believe that anyone knows anything about the future, you need to give each company an equal chance. This is why equal weighting makes better sense.

The next assumption is that we are doing nothing else but simply reinvesting dividends. Given the fact that many brokers offer free trading, and given the passive nature of this portfolio, costs are at zero dollars. This is lower than most of the popular index funds out there, Fidelity being the prime exception..

A lot of investors assume that indexes are passive. In reality, they have a level of turnover, due to natural events such as mergers and acquisitions; however there are often arbitrary events such as the committee deciding to buy or sell securities due to certain criteria not being met ( capitalization for example).

Given the fact that I will not sell ( unless forced through a cash buyout), but I will do absolutely nothing, I expect costs to be very low. I also expect to have zero behavior costs. When investors, institutions and indices remove a company, there is always a risk that the company they replace it with does worse than the original company. There is research out there, confirmed by my own experience, which states that the companies investors sell tend to do better than the companies they buy with the proceeds.

The real advantage of index funds over other investment vehicles is their lower cost and lower turnover. It makes sense that if you hold shares of Johnson & Johnson and pay 2%/year to a greedy financial advisor, you will underperform a passive investor like me, who owns the stock directly and doesn’t pay anyone. It also makes sense that if you actively buy and sell shares, your costs will likely be higher as a result. Plus, there is evidence that you may do worse in comparison to someone who just bought and held due to transactional and behavior costs.

Now that we know what the secret sauce behind index investing success is, I went ahead and made my selections at the end of 2017.

So how did they do in 2018?

Well, it turned out that these investments ended up losing money in 2018. However, they did better than S&P 500 in 2018 (meaning that their loss was smaller than the index). S&P 500 lost 4.38% in 2018, while the 30 selections I made lost 1.63%.  I calculated the total returns for each company in 2018, using the website dividendchannel.com. Please check my math too.

The detail behind the 2018 results is below:

I also compiled the results for the other bloggers who wrote about the contest.

Mr Carl from 1500days.com did much better by selecting some companies as well. His selections made 2.40% in 2018. I admire this writer a whole lot, despite the fact that we seem to have different backgrounds and different paths going forward.

Ben from Sure Dividend selected the S&P Dividend Aristocrats ETF (NOBL) and did better than S&P 500, by losing only 3.30% in 2018. The Dividend Aristocrats Index only lost 2.70% however, which is another reason why it may make sense to buy the companies directly, versus buying them in an ETF form and getting charged an annual fee every year.

Joe Udo from Retireby40 blog selected S&P 500 and lost the most money. It is funny that doing what was considered to be the smart allocation at the end of 2017 turned out to be the “worst” one for the year.

It would be interesting to see what happens over the next nine years.

Thank you for reading!

Relevant Articles:

Dividends Are The Investors' Friend
John Bogle Likes Dividends
Use these tools within your control to get rich
Time in the market is your greatest ally in investing

Monday, February 11, 2019

Twelve Companies Raising Dividends To Their Investors

As part of my monitoring process, I review the list of dividend increases every week. I use this exercise to monitor developments in the companies I own. I also use this process to identify companies for further research. The process I use to look at companies is the same process I use to evaluate dividend growth stocks quickly.

In general, I look for:

1) A ten-year streak of annual dividend increases
2) A history of earnings growth, to support dividend growth
3) An adequate dividend payout ratio, in order to evaluate dividend safety
4) An adequate valuation, to avoid overpaying for stocks

In my review of weekly dividend increases, I focus on the companies with at least a ten year streak of annual dividend increases. I also excluded companies with token dividend increases, such as Microchip Technologies (MCHP) and Healthcare Services Group (HSCG).

After that, I focused on comparing the most recent dividend increase to the ten year average, followed by a review of the trend in earnings per share. This was all followed by a review of whether the stock is price well today.

The companies that raised dividends over the past week, which I ended up reviewing include:

Avista Corporation (AVA) operates as an electric and natural gas utility company. It operates through two segments, Avista Utilities and AEL&P. The company raised its quarterly dividend by 4% to 38.75 cents/share. This marked the 17th consecutive annual dividend increase for this dividend achiever. Over the past decade, Avista has been able to boost dividends at an annualized rate of 8%. The company has managed to grow earnings from $1.36/share in 2008 to $2.07/share in 2018. Avista is expected to earn $2.19/share in 2019. Currently, the stock is fairly valued at 18.80 times forward earnings and spot a dividend yield of 3.80%. The stock may be worth a second look if it dips to 15 – 16 times forward earnings.

CSX Corporation (CSX) provides rail-based transportation services in the United States and Canada. The company raised its quarterly dividend by 9.10% to 24 cents/share. This marked the 15th consecutive annual dividend increase for this dividend achiever. In addition to that, the company announced a $5 billion stock buyback. CSX has been able to boost dividends at an annualized rate of 13.10% during the past decade. The company has managed to grow earnings from $0.96/share in 2009 to $3.84/share in 2018. CSX is expected to earn $4.25/share in 2019.

Right now the stock is attractively valued at 16.20 times forward earnings and yields 1.40%. It may be worth adding to my list for future analysis.

Eversource Energy (ES), a public utility holding company, engages in the energy delivery business. The company operates in three segments: Electric Distribution, Electric Transmission, and Natural Gas Distribution. The company raised its quarterly dividend by 5.90% to 53.50 cents/share. This marked the 21st annual dividend increase for this dividend achiever. Over the past decade, this utility has rewarded shareholders with an average dividend raise of 9.40%/year. The company has managed to grow earnings from $1.67/share in 2008 to $3.11/share in 2017. Eversource Energy is expected to generate $3.28/share in 2018. The stock is overvalued at 21.40 times earnings and spots a dividend yield of 3.20%. Despite being a utility that grows, I would hate to pay too much for it. Perhaps it may be worth adding to my list for further review on dips below $65/share.

3M Company (MMM) operates as a diversified technology company worldwide. Last week, the company raised its quarterly dividend by 5.90% to $1.44/share. This marked the 61st year of annual dividend increases for this dividend king. During the past decade, 3M has managed to grow annual dividends at a rate of 10.50%/year. Between 2009 and 2018, 3M managed to boost earnings per share from $4.52 to $9.18/share. 3M is expected to generate $10.67/share in 2019. Currently, the stock is fairly valued at 18.70 times forward earnings and yields 2.80%.

Archer-Daniels-Midland Company (ADM) procures, transports, stores, processes, and merchandises agricultural commodities, products, and ingredients in the United States and internationally. It operates through four segments: Carbohydrate Solutions, Nutrition, Oilseeds, and Origination. The company raised its quarterly dividend by 4.50% to 35 cents/share. This marked the 44th year of annual dividend increases for this dividend champion. Over the past decade, ADM has managed to grow dividends at an annual rate of 9.90%/year. I expect dividend growth to slow down, given the slow growth in earnings per share over the past decade. Between 2008 and 2018 earnings per share grew only from $2.79 to $3.19. This is after reducing the number of shares outstanding from 646 million in 2008 to 559 million in 2018. The company is expected to earn $3.65/share in 2019. Right now it is attractively valued at 11.70 times forward earnings and yields 3.35%. The lack of earnings growth is concerning to me, which is one reason why I am not interested in adding to my exposure, despite low valuation and safe dividend.

Church & Dwight Co., Inc. (CHD) develops, manufactures, and markets household, personal care, and specialty products. The company operates through three segments: Consumer Domestic, Consumer International, and the Specialty Products Division. The company raised its quarterly divided by 4.60% to 22.75 cents/share. This marked the 23rd year of annual dividend increases for this dividend achiever. The company has managed to grow its dividends by 26.20%/year over the past decade. The strong dividend growth was possible due to the expansion in the dividend payout ratio during the past decade. It was also helped by strong earnings growth over the past decade. Between 2008 and 2018, Church & Dwight managed to grow earnings from $0.69/share to $2.27/share. The company is expected to earn $2.48/share.

Right now the stock is overvalued at 25.50 times forward earnings and spots a dividend yield of 1.40%. Church & Dwight may be worth a closer look on dips below $49/share.

Meredith Corporation (MDP) operates as a diversified media company in the United States, Europe, and Asia. It operates in two segments, National Media and Local Media. The company raised its quarterly dividend by 5.50% to 57.50 cents/share. This marked the 26th consecutive annual dividend increase for this dividend champion. Over the past decade, it has managed to boost distributions at an annual rate of 9.70%/year. The company’s earnings have increased from $2.83/share in 2008 to an estimated $2.93/share in 2019. The past decade has been challenging for a lot of traditional media companies. As a result, this small gain in earnings per share looks like a win. Without growth in earnings per share however, future dividend increases will be limited. Right now the stock is fairly valued at 17.90 times forward earnings and yields 4.40%. The forward dividend payout ratio is high at 78% today however, which further limits the potential for future dividend increases. I find the stock to be a hold in my opinion. I am unsure about initiating a position there.

Simon Property Group (SPG) is a global leader in the ownership of premier shopping, dining, entertainment and mixed-use destinations. The REIT owns properties across North America, Europe and Asia that provide community gathering places for millions of people every day and generate billions in annual sales. The REIT boosted its quarterly dividend by 2.50% to $2.05/share. The increase is a 5.10% year over year increase in the quarterly distribution. The year 2019 will be the tenth consecutive year of annual dividend increases for Simon Property Group. The REIT generated FFO/share of $12.13 in 2018. Simon Property Group estimates that FFO will be within a range of $12.30 - $12.40/share in 2019. In comparison, FFO/share was $6.75 in 2008. They REIT looks fairly priced at 15 times forward FFO and yields 4.45%. The FFO payout ratio also seems sustainable at 67%. While the low expected growth and the fact that dividends were cut in 2009 seem like a red flag, I will add this REIT to my list for further research.

Bemis Company, Inc. (BMS) manufactures and sells packaging products in the United States, Brazil, other Americas, Europe, and the Asia-Pacific. It operates through three segments: U.S. Packaging, Latin America Packaging, and Rest of World Packaging. The company raised its quarterly dividend by 3.20% to 32 cents/share. This marked the 36th consecutive year that Bemis has increased its dividend payment. The dividend increase is in line with the ten year average of 3.50%/year. Bemis has managed to grow earnings from $1.61/share in 2008 to $2.36/share in 2018. The company is expected to earn $2.79/share in 2019. However, Bemis is going to be acquired this year, which means that none of this may matter. It may be helpful if the deal doesn’t go through however. Bemis sells for 21.40 times earnings and yields 2.50%. The stock seems overvalued. However, this seems to be the price for a buyer to purchase the whole business.

Union Pacific Corporation (UNP) operates railroads in the United States. Union Pacific raised its quarterly dividend by 10% to 88 cents/share. This marked the 13th consecutive annual dividend increase for this dividend achiever. During the past decade, Union Pacific has managed to grow its dividends by 20.70%/year. This was supported by strong growth in earnings per share between 2008 and 2018 from $2.27 to $7.91. The company is expected to generate $9.06/share in 2019.

Right now, the stock is fairly valued at 17.80 times forward earnings and yields 2.20%.

Primerica, Inc. (PRI) distributes financial products to middle income households in the United States and Canada. The company operates in three segments: Term Life Insurance; Investment and Savings Products; and Corporate and Other Distributed Products. The company raised its quarterly dividend by 36% to 34 cents/share. This marked the tenth year of annual dividend increases for this newly minted dividend contender. The five year dividend growth rate is an annualized 17.80%. Primerica managed to grow earnings from $2.24/share in 2008 to $7.35/share in 2018. The company is expected to earn $7.21/share in 2019. Primerica has managed to reduce the number of shares outstanding from 75 million in 2008 to 44 million in 2018. Right now, the stock is fairly valued at 16 times earnings and spots a dividend yield of 1.15%.

Prudential Financial, Inc. (PRU) through its subsidiaries, provides insurance, investment management, and other financial products and services in the United States and internationally. It operates through U.S. Individual Solutions, U.S. Workplace Solutions, Investment Management, and International Insurance divisions. Prudential increased its quarterly dividend by 11.10% to $1/share. This marked the 11th year of annual dividend increases for the dividend achiever. Prudential has been able to grow dividends at an annualized rate of 20% over the past decade. This was possible due to the dividend cut in 2008, which makes dividend growth look better than what it should have been. The company managed to grow earnings from $7.61/share in 2007 to $9.50/share in 2018. Right now, the stock is fairly valued at 9.60 times earnings and yields 4.40%. Prudential may be worth adding to the list for further research.

Relevant Articles:

- Dividend Kings List for 2019
- Dividend Aristocrats List for 2019
2019 Dividend Champions List
How to value dividend stocks

Wednesday, February 6, 2019

Dividend Aristocrats for 2019 Revealed

The S&P Dividend Aristocrats index tracks companies in the S&P 500 that have increased dividends every year for at least 25 years in a row. The index is equally weighted, and rebalanced every quarter.

To qualify for membership in the S&P 500 Dividend Aristocrats index, a stock must satisfy the following criteria:

1. Be a member of the S&P 500
2. Have increased dividends every year for at least 25 consecutive years
3. Meet minimum float-adjusted market capitalization and liquidity requirements defined in the index inclusion and index exclusion rules below.

The group of companies in the Dividend Aristocrats index tend to generate reliable dividend income, and provide the potential for strong total returns. The list is well diversified across sectors.

There are 57 companies in the Dividend Aristocrats index for 2019. There were no companies removed from the list in 2018.

The four new additions include Chubb Limited (CB), Caterpillar (CAT), People's United Financial (PBCT) and United Technologies (UTX).

The 2019 Dividend Aristocrats are listed below:


Symbol
Name
Sector
Years of Annual Dividend Increases
10 year Dividend Growth
Dividend Yield
MMM
3M Co
Industrials
60
10.52%
2.72%
ABT
Abbott Laboratories**
Health Care
46
11.89%
1.77%
ABBV
AbbVie Inc.
Health Care
46
13.18%
5.45%
AFL
AFLAC Inc
Financials
36
8.04%
2.18%
APD
Air Products & Chemicals Inc
Materials
37
9.60%
2.82%
ADM
Archer-Daniels-Midland Co
Consumer Staples
43
9.93%
2.98%
T
AT&T Inc
Communication Services
35
2.26%
6.89%
ADP
Automatic Data Processing
Information Technology
44
10.05%
2.26%
BDX
Becton Dickinson & Co
Health Care
47
10.23%
1.25%
BF.B
Brown-Forman Corp B
Consumer Staples
35
8.10%
1.41%
CAH
Cardinal Health Inc
Health Care
23
17.52%
3.81%
CAT
Caterpillar Inc
Industrials
25
7.71%
2.63%
CVX
PBCT
Energy
32
5.88%
3.98%
CB
Chubb Ltd
Financials
25
10.20%
2.19%
CINF
Cincinnati Financial Corp
Financials
58
3.20%
2.61%
CTAS
Cintas Corp
Industrials
36
16.12%
1.09%
CLX
Clorox Co
Consumer Staples
41
8.02%
2.59%
KO
Coca-Cola Co
Consumer Staples
56
7.46%
3.17%
CL
Colgate-Palmolive Co
Consumer Staples
55
7.85%
2.58%
ED
Consolidated Edison Inc
Utilities
45
2.03%
3.81%
DOV
Dover Corp
Industrials
63
9.72%
2.19%
ECL
Ecolab Inc
Materials
27
12.17%
1.16%
EMR
Emerson Electric Co
Industrials
62
4.69%
2.90%
XOM
Exxon Mobil Corp
Energy
36
7.62%
4.38%
FRT
Federal Realty Invt Trust
Real Estate
51
4.95%
3.08%
BEN
Franklin Resources Inc
Financials
39
13.18%
3.46%
GD
General Dynamics
Industrials
27
10.48%
2.17%
GPC
Genuine Parts Co
Consumer Discretionary
62
6.33%
2.89%
GWW
Grainger W.W. Inc
Industrials
47
13.21%
1.84%
HRL
Hormel Foods Corp
Consumer Staples
53
15.02%
1.98%
ITW
Illinois Tool Works Inc
Industrials
44
11.25%
2.91%
JNJ
Johnson & Johnson
Health Care
56
7.03%
2.71%
KMB
Kimberly-Clark
Consumer Staples
47
6.20%
3.70%
LEG
Leggett & Platt
Consumer Discretionary
47
4.00%
3.71%
LIN
Linde plc
Materials
25
8.20%
2.02%
LOW
Lowe's Cos Inc
Consumer Discretionary
56
18.36%
2.00%
MKC
McCormick & Co
Consumer Staples
33
8.98%
1.84%
MCD
McDonald's Corp
Consumer Discretionary
43
9.94%
2.60%
MDT
Medtronic plc
Health Care
41
11.88%
2.26%
NUE
Nucor Corp
Materials
46
1.50%
2.61%
PNR
Pentair PLC
Industrials
43
4.44%
1.75%
PBCT
People's United Financial
Financials
26
1.80%
4.27%
PEP
PepsiCo Inc
Consumer Staples
46
8.03%
3.28%
PPG
PPG Industries Inc
Materials
47
5.94%
1.82%
PG
Procter & Gamble
Consumer Staples
62
6.25%
2.97%
ROP
Roper Technologies, Inc
Industrials
26
18.99%
0.65%
SPGI
S&P Global
Financials
45
8.56%
1.19%
SHW
Sherwin-Williams Co
Materials
40
9.41%
0.82%
AOS
Smith A.O. Corp
Industrials
25
19.94%
1.84%
SWK
Stanley Black & Decker
Industrials
51
7.43%
2.09%
SYY
Sysco Corp
Consumer Staples
49
5.05%
2.44%
TROW
T Rowe Price Group Inc
Financials
32
11.30%
3.00%
TGT
Target Corp
Consumer Discretionary
51
15.43%
3.51%
UTX
United Technologies
Industrials
25
7.74%
2.47%
VFC
VF Corp
Consumer Discretionary
46
12.49%
2.40%
WBA
Walgreens Boots Alliance Inc
Consumer Staples
43
15.01%
2.44%
WMT
Wal-Mart
Consumer Staples
45
8.30%
2.19%


The index has generated strong total returns over time past decade. I wanted to note that in 2008, the Dividend Aristocrats index declined by 21.88%. The S&P 500 however declined by 37%. The dividend aristocrats index tends to shine during bear markets and low return environments. However, it also pulls its weight when we are in a bull market too. It is the best of both worlds really.



I first stumbled upon the Dividend Aristocrats index in late 2007, and instantly understood why dividend growth investing is such a powerful wealth generating tool. If someone had invested in the Dividend Aristocrats index after reading my review of the list at the beginning of 2008, they would have tripled their money. An investment in the dividend aristocrats a decade ago, would have resulted in a total return of 350%. In other words, investing $100 in the Dividend Aristocrats list in February 2019 would have turned into $454. The same amount investing in S&P 500 would have turned into $395.



As I gained more experience however, I have gravitated more towards the Dividend Champions list, which was created by Dave Fish. The Dividend Champions list is more complete, as it doesn’t exclude companies due to low liquidity, or due to market capitalization below a certain threshold. In addition, I find that historically, the list of Dividend Champions has followed a more consistent approach than the list of Dividend Aristocrats. Sadly, Dave passed away last year. Luckily, another person has agreed to update it for the time being. You can view the 2019 Dividend Champions List here.

When I review the list of historical changes in the Dividend Aristocrats index, I see some inconsistencies in the way portfolio components are added or removed.

For example, the Dividend Aristocrats index removed Altria in 2007, after it spun-off Kraft Foods and as a result its dividend decreased. It could be argued that the dividend income for the investor was not decreased, because they kept getting a dividend from Altria as well as dividends from Kraft Foods.

The S&P committee seems to have rectified this issue, and have kept both Abbott and Abbvie after legacy Abbott Laboratories split in two companies in early 2013.

Ironically, Dave Fish had Altria listed as a Dividend Champion. However, he didn’t have Abbott nor Abbvie listed as a dividend champion ( they are listed as Dividend Aristocrats however).

Last year, I found out that Cardinal Health (CAH) has only been able to grow dividends for 23 years in a row. This is why it is not on the dividend champions list. The dividend aristocrats list however has a 31 year streak of annual dividend increases listed.

This is why you need to perform your own checks as an investor.

In addition, I wanted to let you know that I would not purchase all companies from either lists blindly. I run my entry criteria screen to come up with a list of companies for further research. Before investing in any individual stock, I research it enough to gain some understanding of the business and its trends in fundamentals.

Relevant Articles:

Dividend Champions, Contenders & Challengers: The most complete list of US dividend growth stocks available
Dividend Aristocrats List for 2017
Dividend Aristocrats for Dividend Growth and Total Returns
Where are the original Dividend Aristocrats now?
Historical changes of the S&P Dividend Aristocrats
Why do I like the Dividend Aristocrats?
Dividend Aristocrats List for 2016

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