Thursday, June 14, 2018

Historical Performance Of The Dividend Kings List

The dividend kings list includes the most elite dividend growth companies in the US. A dividend king is a company that has managed to increase its dividends to shareholders for at least 50 years in a row.

This is a testament to the endurance and resilience of those businesses over the past 50 years. This great track record make each dividend king an excellent case study on what makes for a successful and lasting investment.

I first came up with the term dividend king in 2010. Since then, there have been hundreds of copycats who talk about the concept, without even giving me any credit.

For the purposes of today's article, I backtested the performance of the dividend kings list since the end of 2007. I used data from the compilation of historical Dividend Champions lists created by the late Dave Fish and stored by the site of Robert Allan Schwartz.

I calculated to total returns performance per year for each group of dividend kings. I assumed that portfolios were equally weighted in a tax-deferred account that qualified for commission free trades.

I followed the historical changes in the dividend kings list using information that an investor at the time would have used. Therefore, the 2008 total return was for the dividend kings available on December 31, 2007. The 2009 total return was for the dividend kings available on December 31, 2008 etc. This method assumes annual rebalancing at year-end in order to account for new additions and removals, and to equally weight the components at year-end. All of this was to ensure that this backtest doesn’t suffer from survivorship bias.

I am not going to name names, but I have seen articles on the internet which use the historical performance of today’s dividend kings to show their total returns over the past 20 – 30 years. This is misleading, because the current list of dividend kings was not known in advance in 1988 or 1998. That is an example of survivorship bias, which is misleading to investors.

Since I am also a one person operation with a computer and a spreadsheet, I assumed that dividends were collected throughout the year in cash. Therefore, the performance at the end of the year consists of the difference in year-end closing prices plus the cash dividends paid during the year, relative to the closing prices from the preceding year.

The number of dividend kings increased from 8 at the end of 2008 to 20 by the end of 2016. By the end of 2017, there were 25 dividend kings. You may review the current list as well as the evolution of the historical listings in this article.

As a result of the process followed above, I came up with the following annual performance of the Dividend Kings List. Subscribers to my mailing list will also receive the spreadsheet that includes the information used it today's analysis.

I then compared it to the annual performance of S&P 500 during the same time period.

Annual Total Returns


Dividend Kings

S&P 500








































If you had invested $100 in the list of dividend kings at the end of 2007, and followed the process outlined above, you would have $265.06 by the end of 2017. A $100 investment in S&P 500 during the same time period would have returned only $225.84. Ironically, the dividend kings list managed to beat the S&P 500 in just 5 out of the past 11 years. A large reason for the outperformance was due to the fact the list only fell by 21% in 2008, when S&P 500 crashed by 37%.

The Dividend Kings provide a better performance when stock prices decline, as was the case in 2008 and 2018. During an increase, like the bull market of the past decade, they keep up with S&P 500 over time, though not every single year.

For the year of 2019, as of December 27, 2019, the Dividend Kings list trailed the S&P 500, though it is still ahead since 2007.

Data Source

After going through this exercise, I would want to caution you a little bit. Please be aware that past performance does not guarantee future results. It is quite possible that the dividend kings do not live up to their potential over the next decade. Or, they could surprise everyone and deliver spectacular results in the future. Noone can forecast the future. While we can see historical results using past data, we can only have a rough estimate of what happened in the past. Be careful in projecting the past onto the future.

While I am infatuated with the stories of each individual dividend king, that doesn’t mean that these companies are automatic buys today. Regular readers know that I review each company for a few characteristics such as growth in fundamentals, dividend safety and valuation. A long track record may pique my interest in researching a company. However, if it doesn’t grow earnings, or the dividend payout ratio is high or the valuation is obscene, I will walk away from this investment.

Relevant Articles:

2018 Dividend Kings List
- Investing in the Dividend Aristocrats from 2007
- Investing in the Dividend Champions from 2007
- Where are the Original Dividend Champions today?

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