Monday, February 26, 2024

16 Dividend Growth Companies That Increased Dividends Last Week

I review the list of dividend increases every week, as part of my monitoring process. This exercise helps me monitor existing holdings, but also potentially identify companies for further research. Plus, it helps me get the pulse of corporate boards. One of my favorite exercises in compiling this report is to look at the press releases, and noting down management verbiage related to the dividend increases. That pulse check is a good sentiment check. After all, dividends have a great deal of signaling power, which neatly summarizes corporate board expectations about near term business conditions. The output of that being the dividend increase amounts. 

TL;DR - dividend increase announcements include a lot of information that could be helpful to me as an investor.

Over the past week, there were 53 dividend increases in the US. I went ahead and isolated the 16 companies that increased dividends last week AND have a ten year track record of annual dividend increases. The list can be observed below:



Reviewing the dividend growth universe for dividend increases is part of my monitoring process. For my review, I narrow my focus to the companies with a ten year streak of annual dividend increases. I do this in order to look at companies with a sufficiently long streak of dividend growth.

The next step involves reviewing trends in earnings and dividends. I want to see earnings per share which are growing. Rising EPS can fuel future dividend growth. I also want to see dividend increases which are of decent size, and not done merely to maintain the streak of annual dividend increases.

A steep deceleration in the dividend growth rate relative to the ten year average tells me that management is not very optimistic on their business. If this is coupled with a high payout ratio and stagnant earnings per share, I can tell that the dividend streak is nearing its end.

Last but not least, I also want a decent valuation behind an investment. If I overpay dearly for an investment today, this means that the expectations for the first few years after I make the investment are already baked in the price. As a result, I want to void overpaying for an investment. Unfortunately, this is easier said than done.

Relevant Articles:




Wednesday, February 21, 2024

Yield on Cost is a fascinating metric

Yield on Cost is a fascinating metric. It calculates the dividend yield based on the original cost at the time of purchase.

Yield on cost is calculated by dividing the dividends received from an investment over the cost paid for the shares.

I view yield on cost as a forward looking metric.

It combines my yield and growth expectations into a certain amount of dividend income at a future point.

It's fascinating to see in action, anytime you buy a security. It get's me thinking about the current yield, growth in earnings per share, dividend safety, valuation.

For example, Home Depot (HD) sold for about $80/share ten years ago and had a trailing annual dividend of $1.56/share.

The dividend yield was paltry at around 2% back then.

Some investors could have ignored Home Depot, because of its "low yield", in favor of other higher yielding companies. Mostly to their own detriment.

However, they missed out on the potential for future dividend growth.

Fast forward to today, Home Depot is on track to pay $9/share in annual dividends. 


This brings the yield on cost at over 11%.



That's a better yield and dividend income that would have been achieved by investing in a company that yields say 5% or 6%, but which never raised dividends by much.

As I said above, I view Yield on Cost as a forward looking metric. 

It looks at current dividend yield and accounts for future estimated dividend growth.

There is a trade-off between dividend growth and dividend yield

Taking a look at Yield on Cost definitely puts things in perspective.

What's even more fascinating to me is that even The Oracle of Omaha, Warren Buffett himself, has discussed the concept in his letters to Berkshire Hathaway shareholders. The last mention was just last year, when he discussed his investments in Coca-Cola and American Express. Please see below: (Source)










Sunday, February 18, 2024

Eighteen Companies Rewarding Shareholders With a Raise

I review the list of dividend increases as part of my monitoring process. This process helps me review how the companies I own are doing. It also helps me identify companies for further research.

For this weekly review, I tend to focus my attention on companies with at least a ten year history of annual dividend increases, which also raised dividends last week. I provide a quick overview of each company that includes the amount of the most recent dividend increase, and compares it to its recent historical record. I also review the streak of annual dividend increases, and review earnings and valuation information.

Over the past week there were eighteen companies that raised dividends, and have a ten year history of annual dividend increases. The companies include:



You can view the company, ticker, and ten year dividend growth. I have also included P/E ratio and dividend yield, as well as dividend payout ratio. 

Each of these companies has managed to grow earnings over the past decade, which means that dividends have been well supported. If these companies can continue growing earnings per share over the next decade or two, I am confident that they would continue their streak of consecutive annual dividend increases.

However, our work here is not done. Just because we have identified a group of companies for further research, which I would love to own forever, that still doesn't mean that these companies are automatic buys today. Some of these companies seem attractively valued to me today, based on a combination of their P/E ratios and dividend growth. 

Others however seem a little pricey. Therefore, they would likely find a place in my portfolio if they become more attractively valued. This can be achieved either by earnings per share growth, by declines in the share price, or a combination of the two.

This my general framework on how I value companies. I take into consideration many inputs, such as P/E, interest rates, stability of earnings, dividend growth, in order to come up with a general idea of what to invest my money in. It is not a formula however. 

It is helpful to be prepared to act when the right opportunities present themselves. This is why I have a watchlist and general ideas on valuation, so I can act when the time is right.

Relevant Articles:

Dividend Growth Investor Newsletter

Dividend Aristocrats List for 2024

How to value dividend stocks

Rising Earnings – The Source of Future Dividend Growth

Wednesday, February 14, 2024

How to Earn a 3% IRA Match with Robinhood

The employer match is one of the best features of workplace retirement accounts such as 401 (k) plans ( Pre-tax and Roth). It’s a contribution from the employer into the employee workplace retirement account. It’s as close to as it gets to “Free Money”, albeit it is all part of total compensation.

Online broker Robinhood is having an interesting promotion, related to retirement accounts. 

They basically offer a match on retirement contributions and asset transfers of up to 3%, with no limits. The IRA match doesn't count toward your annual contribution limit, which means it’s extra money on top of your contributions. You can earn the IRA match on all new IRA contributions, IRA transfers, and 401(k) rollovers. In addition, the bonus is simply added to your retirement account, which does not generate a taxable event.

There are some hoops one needs to jump through however, in order to get that bonus.

1.      Robinhood clients need to sign up for Robinhood Gold, which costs $5/month. The bonus requirement is that the client is an active Robinhood Gold user for at least 12 months.

2.      Robinhood clients need to transfer an old Roth IRA from another broker into Robinhood in order to be eligible for the 3% match on transfers. Examples include transferring assets from a broker like Merrill Edge into Robinhood. This can all be done electronically from the Robinhood interface.

 

This offer also applies to regular contributions, which are subject to the annual contribution limits. For example, contributing $7,000 to a Roth IRA at Robinhood makes the customer eligible for the 3% match on said contribution. Provided of course that the customer has signed up for Robinhood Gold.

 

3.       The offer ends April 30 on the asset transfer bonus from another brokerage.

4.      The catch is that there is a 5 year holding period for asset transfers from another brokerage. In other words, those assets that have been transferred into Robinhood need to stay at Robinhood for 5 years. Otherwise, the client forfeits that bonus.

When the IRA transfer completes, the amount of the match is calculated based on 3% of the total of the transferred cash plus transferred securities and options, using the National Market System closing price of each position transferred into the account on the trading day before when the transfer settles.

Robinhood would also reimburse any transfer fees up to $75, assuming that at least $7,500 are transferred over from another broker.

For IRA transfers it typically takes 5-7 business days for the transfer to be completed in the Robinhood account, after they receive an account transfer request. For 401(k) rollovers, this process can typically take 2-4 weeks for deposits to complete.

A rollover is not always the best choice for old 401 (k) accounts too. In some cases it may be beneficial to keep the money in the 401 (k). Perhaps speaking to a licensed financial professional can help weigh options.

Overall, I believe it sounds like an interesting offer. This is obviously an attempt from Robinhood to get more retirement assets in their brokerage business. Retirement assets are stickier, which can potentially increase customer lifetime value and profits for Robinhood.

It is a very good offer, which may or may not be a sign of desperation on behalf of Robinhood.

The brokerage business is very competitive, and very commoditized as well. There is a risk that a broker may fail. This is why it is important for investors to be aware that they are only protected up to the first $500,000 per account type per broker through the SIPC, should that broker fail. That means it’s probably not smart to keep all assets at one brokerage to begin with as it could take time for assets to be given back to customers for example.

If Robinhood were to fail or be acquired by someone else, it is unclear if they would claw back that bonus money or let the customer keep it.

I do not have a clue if Robinhood would fail or be in business in 5 years. That’s just my opinion of thinking through the risks potentially associated with this return.

These are some of the risks I thought about in an effort to list pros and cons.  

This is not an affiliate or paid post. I am just trying to determine for myself if it makes any sense to move some assets to Robinhood and take advantage of this offer. 

This is their FAQ section on the offer.

These are screenshots from the Robinhood app, which inspired me to review this deal.



 


 It could take some navigating on the app to find this deal however.


 

 

 

Monday, February 12, 2024

25 Dividend Growth Stocks For Further Research

There were 68 dividend increases in the past week. It looks like corporate boards are flush with cash, and consumer confidence is slowly rising. There is a record low unemployment, and the consumer is spending again, which is good for corporate revenues and bottom lines.


When companies raise dividends, they signal their confidence in the near term prospects of the business. A dividend is a sacred cow in the US. This is why business leaders need to evaluate the cashflow estimates over the next couple of years against estimated cash outflows and growth plans for future investment. Only after a reasonable amount of cashflow is left over, which is more than what the business needs, can they decide what the dividend rate should be. If a business expects to grow excess cashflows over time, they will most likely return a growing amount of cashflows to its shareholders.

Our goal is to evaluate each business, its prospects, fundamentals and valuation, before considering it for our portfolios.

Out of the list of 60+ dividend increases, I focused on the companies that have increase dividends for at least ten years in a row. There were 25 companies that raised dividends last week, which also have at least a ten year streak of annual dividend increases. Two of those companies were dividend kings, having increased dividends for over 50 years in a row. Three of these companies are dividend champions, having increased dividends for over 25 years in a row. The rest were either dividend achievers, or newly minted dividend achievers.

I then consolidated the information in a tabular format, for easier review:







This list is not a recommendation to buy or sell stocks. It is simply a list of companies that raised dividends last week. The companies listed have managed to grow dividends for at least ten years in a row.

The next step in the process would be to review trends in earnings per share, in order to determine if the dividend growth is on strong ground. Rising earnings per share provide the fuel behind future dividend increases.

This should be followed by reviewing the trends in dividend payout ratios, in order to check the health of dividend payments. A rising payout ratio over time shows that future dividend growth may be in jeopardy. There is a natural limit to dividends increasing if earnings are stagnant or if dividends grow faster than earnings.

Obtaining an understanding behind the company’s business is helpful, in order to determine how defensible the dividend will be during the next recession. Certain companies are more immune to any downside, while others follow very closely the rise and fall in the economic cycle.

Of course, valuation is important, but it is more art than science. P/E ratios are not created equal. A stock with a P/E of 10 may turn out to be more expensive than a stock with a P/E of 30, if the latter is growing earnings and the former isn’t. Plus, the low P/E stock may be in a cyclical industry whose earnings will decline during the next recession, increasing the odds of a dividend cut. The high P/E company may be in an industry where earnings are somewhat recession resistant, which means that the likelihood of dividend cuts during the next recession is lower.

Relevant Articles:

Not all P/E ratios are created equal
My Entry Criteria for Dividend Stocks
Dividend Growth Investing Gets No Respect
Why the best investment plans never turn out as expected

Wednesday, February 7, 2024

The best investors in the world are dead

A few years ago, I read about a study conducted by Fidelity on its client brokerage accounts. The study tried to identify the best performing investors at the brokerage, by reviewing account returns.

They came to a stark discovery – the best investors were either dead or had forgotten to log on to their accounts for a long period of time. Perhaps they forgot their passwords, and got locked out of their accounts, but didn’t bother resetting them.

It makes intuitive sense that accounts where investors do little trading would do better than accounts that are more active.

There are several reasons why that would make sense:

1) When you buy and sell stocks often, you incur costs. 

Back in the day, you had to pay a commission to buy and to sell a stock. If you do that enough times, you can be out of some serious cash. Even if you lose 1% of your portfolio value to commissions and fees each year, that could eat away a sizeable chunk of returns over time. Costs compound over time, but unfortunately not in your favor. Plus, when you buy and sell stock, you end up losing a little bit on the buying and selling, because you buy at the ask price and sell at the bid price. The difference varies from company to company, but it also adds up over time. We are not even going to discuss taxes, which can eat up a portion of returns, especially if you invest in a taxable account.

2) When you buy and sell stocks too, you often pay an opportunity cost as well. 

I have read some academic research that showed how companies that investors have sold tended to do much better than the companies the investor replaced them with. For example, if you sold Johnson & Johnson (JNJ) in the year 2000, you missed out on a stock that returned several times its original cost. 

If you replaced it with a tech flyer like Nokia for example, you ended up losing money, and missing out on Johnson & Johnson. If you had simply sat tight, you would have actually made money. That difference between what you could have achieved by patiently holding on to Johnson & Johnson and the actual result from buying Nokia in 2000 is your opportunity cost. Some may call this behavioral cost as well. Chasing what is hot, which is what following Nokia or other red hot tech darlings were in 1999 – 2000 was a big cost to investors.

3) Behavior costs are costly

I have personally fallen for behavioral costs. I have seen companies that seem to suffer through some issues, and I would sell them. Then these companies would miraculously recover and returns would revert to the mean. The companies I replaced them with either turned out ok, or they didn’t do as well.

I have also ended up selling companies because I thought they were too high, and replaced them with something else. You live and you learn.

At the end of the day, a lot of investors fall for the idea that you won’t go broke taking a profit. The problem is that you won’t get rich either. That’s because if you look at the Paretto principle, 80% of results would be concentrated in the top 20% of companies. In other words, if you sell too early from these 20% of companies that generate most capital gains and dividends, you are shooting yourself in the foot. And if you replace these companies with bad ones, you are compounding your mistakes. 

Peter Lynch describes it as “cutting the flowers and watering the weeds”.

Investors tend to trade a lot in general, chasing what is hot, and selling what is not. At the end of the day, they end up consistently buying high and selling low, which turns out to be costly for long-term returns.

While the study does sound plausible, the reality is that it does not exist. It is just a popular piece of Wall Street Folklore.

However, it does confirm my observations that your portfolio is a like a bar of soap – the more you handle it, the smaller it gets.

You can read more about my observations in the four articles referenced below:

- Corporate Leaders Trust - No new investments since its launch in 1935

- Coffee Can Portfolio

- The performance of the original companies in S&P 500 from 1957

- Stocks that leave the Dow tend to outperform after their exit from the average



Sunday, February 4, 2024

25 Companies Rewarding Shareholders With Raises

I review the list of dividend increases every week, as part of my monitoring process. This exercise helps me monitor existing holdings, and review the dividend growth investing universe for potential new ideas.

There were 49 dividend increases in the past week. I reviewed each one. I loved reading through the press releases, in order to gauge what management is saying about their dividend policies. The paragraph below includes a few snippets from companies about their dividend policies.

An increase in regular cash dividends demonstrates the strength of a company's balance sheet and its ongoing commitment to creating value for our shareholders.  It reflects confidence that companies will again deliver on their promises. Companies treasure track record of dividend growth and remain committed to extending it, supported by the strength of capital and cash flows.

We also had Meta (META), whose former name was Facebook, initiating dividends for the first time. I view that as a positive factor. That's because a dividend focuses managements attention to projects with high return on investment. Any cashflow that does not meet minimum hurdle rates should be sent back to shareholders on a consistent basis. Otherwise, that money could be wasted on unprofitable projects or be deployed at sub-par returns, which sap management attention and company resources. 

Of the companies raising dividends, I narrowed it down to those companies that have managed to boost dividends for at least ten years in a row. This leaves us with 25 companies that increased dividends last week and have a ten year track record of annual dividend increases:






This list is not a recommendation to buy or sell anything. Just a listing of companies that raised dividends last week.

I did go ahead and sort through it for companies I own. I was disappointed in the small dividend increase from Church & Dwight (CHD). I typically expect higher dividend growth from lower yielding companies that are also overvalued for example. This means that I would refrain from adding to this position for the time being.

This list also put a few companies on my list for research, or continued monitoring. I would love to invest in MSCI if it is ever available at a more attractive valuation.

When I review companies, in general I look for:

1) Track record annual dividend increases

2) Earnings per share growth over the past decade, as well as forward estimates

3) Dividend growth over the past decade, as well as recent dividend increase

4) A defensible dividend payout ratio

5) Qualitative assessments

6) Attractive valuation

I can get a pretty decent picture of whether I like a company or not, by looking at all of those together.


Relevant Articles:

- Five Dividend Growth Companies Raising Dividends Last Week

- Four Dividend Growth Companies Rewarding Shareholders With a Raise





Monday, January 29, 2024

27 Companies Rewarding Shareholders With Raises

I review the list of dividends increases as part of my monitoring process. This exercise helps me monitor existing holdings and potentially identify new companies for further research.

Last week was a very busy week for dividend increases. There were 59 companies in the US which managed to increase dividends to shareholders. This time of the year is typically a busy time for dividend increases in general.

I typically focus my attention on the companies that have managed to increase dividends for at least a decade, in order to identify companies that are more likely to keep growing those dividends in the future.

There were 27 companies that raised dividends last week, which have also managed to increase anual dividends for at least a decade.



This is a list of companies for further review. Most seem attractive as businesses, but that doesn’t mean that they should be invested in at any price, regardless of valuation.

The next step is to check each business, in order to determine if it is worth further review. I would look at ten year trends in earnings per share, dividends per share, payout ratios, shares outstanding. I would try to understand what the business does, and make an assessment if the good times would continue, so that I can expect higher earnings, dividends and intrinsic values over time. I would look at the valuation relative to earnings and dividend growth, in order to determine if the business is fairly valued, if it looks promising too. 

Relevant Articles:


- Four Dividend Growth Companies Rewarding Shareholders With a Raise






Wednesday, January 24, 2024

Dividend Aristocrats List for 2024

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 a record 67 companies in the Dividend Aristocrats index for 2023.

For 2024, there were several changes. The index added:

- Fastenal (FAST)

The index removed:

- Walgreens (WBA).


The index also added KenVue, which was a spin-off from Johnson & Johnson later in 2023. The S&P Index Committee assigned the dividend history record of Johnson & Johnson to Kenvue. This is what they had done previously with Abbvie/Abbott in 2013. However, they didn't do this for Altria/Phillip Morris International/Kraft in 2007/2008.

The index also removed V.F. Corp (VFC) in early 2023, when the company cut dividends.

Since the inception of the index in 1989, the number of holdings has fluctuated from 26 to 68 holdings. This year marks the highest number of dividend aristocrats ever, on record. It is still not even half the number of Dividend Champions however.


The 2023 Dividend Aristocrats are listed below:

Symbol

Name

Sector

Years of Annual Dividend Increases

10 year Dividend   Growth

Dividend Yield

ABBV

AbbVie Inc.

Health Care

51

13.98%

4.00%

ABT

Abbott Laboratories

Health Care

51

13.80%

2.00%

ADM

Archer-Daniels-Midland Co

Consumer Staples

48

9.00%

2.49%

ADP

Automatic Data Processing

Information Technology

48

12.64%

2.40%

AFL

AFLAC Inc

Financials

42

8.99%

2.42%

ALB

Albemarle Corp.

Materials

29

5.21%

1.11%

AMCR

Amcor

Materials

28

#N/A

5.28%

AOS

Smith A.O. Corp

Industrials

30

18.16%

1.55%

APD

Air Products & Chemicals Inc

Materials

41

9.51%

2.56%

ATO

Atmos Energy

Utilities

40

7.86%

2.78%

BDX

Becton Dickinson & Co

Health Care

52

6.13%

1.56%

BEN

Franklin Resources Inc

Financials

44

11.99%

4.16%

BF.B

Brown-Forman Corp B

Consumer Staples

39

6.89%

1.58%

BRO

Brown & Brown

Financials

30

9.89%

0.73%

CAH

Cardinal Health Inc

Health Care

27

5.60%

1.99%

CAT

Caterpillar Inc

Industrials

30

7.89%

1.76%

CB

Chubb Ltd

Financials

30

5.39%

1.52%

CHD

Church & Dwight

Consumer Staples

27

6.89%

1.15%

CHRW

C.H. Robinson Worldwide

Industrials

26

5.71%

2.82%

CINF

Cincinnati Financial Corp

Financials

63

5.99%

2.90%

CL

Colgate-Palmolive Co

Consumer Staples

60

3.69%

2.41%

CLX

Clorox Co

Consumer Staples

46

5.83%

3.37%

CTAS

Cintas Corp

Industrials

41

20.57%

0.90%

CVX

Chevron Corp

Energy

36

4.47%

4.05%

DOV

Dover Corp

Industrials

68

5.30%

1.33%

ECL

Ecolab Inc

Materials

32

8.71%

1.15%

ED

Consolidated Edison Inc

Utilities

49

2.79%

3.56%

EMR

Emerson Electric Co

Industrials

67

2.31%

2.16%

ESS

Essex Property Trust

Real Estate

29

6.80%

3.73%

EXPD

Expeditors International

Industrials

29

8.69%

1.08%

FAST

Fastenal

Industrials

25

13.35%

2.16%

FRT

Federal Realty Invt Trust

Real Estate

56

3.84%

4.23%

GD

General Dynamics

Industrials

32

9.07%

2.03%

GPC

Genuine Parts Co

Consumer Discretionary

67

5.71%

2.74%

GWW

Grainger W.W. Inc

Industrials

52

7.36%

0.90%

HRL

Hormel Foods Corp

Consumer Staples

58

12.46%

3.52%

IBM

Intl Business Machines

Information Technology

28

6.01%

4.06%

ITW

Illinois Tool Works Inc

Industrials

49

13.07%

2.14%

JNJ

Johnson & Johnson

Health Care

61

6.14%

3.04%

KMB

Kimberly-Clark

Consumer Staples

51

4.46%

3.88%

KO

Coca-Cola Co

Consumer Staples

61

5.09%

3.12%

KVUE

Kenvue

 

61

#N/A

1.91%

LIN

Linde plc

Materials

30

7.83%

1.24%

LOW

Lowe's Cos Inc

Consumer Discretionary

61

20.25%

1.98%

MCD

McDonald's Corp

Consumer Discretionary

48

7.16%

2.25%

MDT

Medtronic plc

Health Care

46

9.76%

3.35%

MKC

McCormick & Co

Consumer Staples

37

8.66%

2.46%

MMM

3M Co

Industrials

65

8.98%

5.49%

NEE

NextEra Energy

Utilities

29

10.98%

3.08%

NDSN

Nordson Corp

Industrials

60

15.36%

1.03%

NUE

Nucor Corp

Materials

51

3.33%

1.24%

O

Realty Income Corp.

Real Estate

31

3.57%

5.36%

PEP

PepsiCo Inc

Consumer Staples

51

8.13%

2.98%

PG

Procter & Gamble

Consumer Staples

67

4.67%

2.57%

PNR

Pentair PLC

Industrials

48

3.16%

1.27%

PPG

PPG Industries Inc

Materials

52

7.70%

1.74%

ROP

Roper Technologies, Inc

Industrials

31

15.26%

0.55%

SHW

Sherwin-Williams Co

Materials

45

13.76%

0.78%

SJM

J.M. Smucker

Consumer Staples

26

6.58%

3.35%

SPGI

S&P Global

Financials

50

12.39%

0.82%

SWK

Stanley Black & Decker

Industrials

56

4.98%

3.30%

SYY

Sysco Corp

Consumer Staples

53

5.86%

2.73%

TGT

Target Corp

Consumer Discretionary

56

10.68%

3.09%

TROW

T Rowe Price Group Inc

Financials

37

12.37%

4.53%

WMT

Wal-Mart

Consumer Staples

50

2.30%

1.45%

WST

West Pharmaceutical Services

Health Care

31

7.18%

0.23%

XOM

Exxon Mobil Corp

Energy

41

4.11%

3.80%

Note: Data as of 12/31/2023




Note: Data as of 12/31/2023


The index has generated strong total returns over time past decade. 

It tends to shine during bear markets, such as 2000 - 2003, 2007 - 2009 and 2022. 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.

These are the returns since the launch of the Dividend Aristocrats Index in 1989:




You can see the performance of the Dividend Aristocrats Index versus S&P 500 since 1989. The S&P 500 dominated during the 1990's. However, the Dividend Aristocrats index did very well during the next decade. During the past decade, the Dividend Aristocrats Index has basically matched S&P 500 until early 2020. Over the past two years, it has trailed S&P 500 slightly. 





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 more than tripled their money. 


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 2024 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).


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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