What is a Dividend Aristocrats?
Dividend Aristocrats is the name used for stocks that are members of the S&P 500 that have increased their dividends every year for the past 25 years. A dividend is a payment made by a company to shareholders of record by a predetermined date of eligibility.
Dividends are a way for public companies to distribute profits back to shareholders, and one of the ways shareholders earn a return from putting their money in stocks. Many investors are often drawn to Dividend Aristocrats because they offer a steady flow of dividends that are not dependent on the stock market.
The S&P 500 Dividend Aristocrat index was introduced in 2005 by Standard and Poor’s. It includes stocks from all 11 sectors of the S&P 500 index and has both large-cap value and large-cap growth companies among its stock listing.
In this article, we will explain how companies are picked to become Dividend Aristocrats and include a list of the current Aristocrats.
How companies are selected to become Dividend Aristocrats
To be added to the Dividend Aristocrat index, a company has to meet the following criteria:
- The company must currently be part of the S&P 500 index
- Must have grown its dividend payouts each year for at least 25 years
- Its market cap must be a minimum of $3 billion
- Liquidity, at least $5 million
- Must have diversified at least 40 constituents and not sector allocation beyond 30%
Meeting these criteria is not a guarantee that a company will join this select group of stocks – these are just the minimum requirements.
Dividend Aristocrat List
As of December 31, 2019, the 57 companies that are Dividend Aristocrats are:
- 3M (NYSE: MMM)
- AT&T (NYSE: T)
- Abbott Laboratories (NYSE: ABT)
- Aflac (NYSE: AFL)
- AbbVie (NYSE: ABBV)
- Archer Daniels Midland (NYSE: ADM)
- O. Smith (NYSE: AOS)
- Air Products & Chemicals (NYSE: APD)
- Becton, Dickinson & Co (NYSE: BDX)
- Automatic Data Processing (NASDAQ: ADP)
- Cardinal Health (NYSE: CAH)
- Brown-Forman (B Shares) (NYSE: BF-B)
- Chevron (NYSE: CVX)
- Caterpillar (NYSE: CAT)
- Cincinnati Financial (NASDAQ: CINF)
- Clorox (NYSE: CLX)
- Chubb (NYSE: CB)
- Cintas (NASDAQ: CTAS)
- Coca-Cola (NYSE: KO)
- Dover (NYSE: DOV)
- Emerson Electric (NYSE: EMR)
- Consolidated Edison (NYSE: ED)
- Ecolab (NYSE: ECL)
- Genuine Parts (NYSE: GPC)
- ExxonMobil (NYSE: XOM)
- General Dynamics (NYSE: GD)
- Federal Realty Investment Trust (NYSE: FRT)
- Franklin Resources (NYSE: BEN)
- Johnson & Johnson (NYSE: JNJ)
- Illinois Tool Works (NYSE: ITW)
- Hormel Foods (NYSE: HRL)
- Lowe’s (NYSE: LOW)
- Kimberly Clark (NYSE: KMB)
- Linde (NYSE: LIN)
- Leggett & Platt (NYSE: LEG)
- Pentair (NYSE: PNR)
- McCormick & Co (NYSE: MKC)
- PPG Industries (NYSE: PPG)
- Medtronic (NYSE: MDT)
- McDonald’s (NYSE: MCD)
- Nucor (NYSE: NUE)
- Procter & Gamble (NYSE: PG)
- People’s United Financial (NYSE: PBCT)
- PepsiCo (NASDAQ: PEP)
- Stanley Black & Decker (NYSE: SWK)
- Roper Technologies (NYSE: ROP)
- Sherwin-Williams (NYSE: SHW)
- S&P Global (NYSE: SWGI)
- Walmart (NYSE: WMT)
- Target (NYSE: TGT)
- Walgreens Boots Alliance (NASDAQ: WBA)
- W. Grainger (NYSE: GWWW)
- United Technologies (NYSE: UTX)
- Rowe Price Group (NASDAQ: TROW)
- Sysco (NYSE: SYY)
- VF Corp (NYSE: VFC)
If a company fails to boost their dividend at any given year, they are removed from the list and can’t be added until they reestablish their dividend growth streak after 25 years. The Dividend Aristocrat list is compiled annually from high-quality, blue-chip stocks in the S&P 500.
Dividend Aristocrats ETF: ProShares S&P 500 ($NOBL)
The ProShares S&P 500 Dividend Aristocrats (NOBL) is a dividend-focused ETF. An ETF is a basket of stocks. ETFs are similar to mutual funds, but they trade like individual stocks. They can provide exposure to an industry sector or the broad market, generally with less risk than buying individual stocks.
For instance, an investor who owns only shares of Company XYZ is fully exposed if the stock slumps. But with an ETF, the investor might own shares in Company XYZ along with many other stocks in the same sector, thus reducing overall risk exposure to a downturn.
Dividend ETFs, like ProShares S&P 500 Dividend Aristocrats (NOBL) for example, combine the two investment choices.
NOBL is the only ETF that tracks the S&P 500 Dividend Aristocrats Index. The fund has provided attractive returns to investors since its inception in 2013 and delivered outperformance during times of market volatility. While the S&P 500 dropped 4.60% in 2018, this fund was lower by just 3.30%.
It currently has a dividend yield of 1.90%, implying plenty of room for dividend growth moving forward. Its expense ratio is 0.35% and the fund had nearly $6.45 billion in total assets as of January 10, 2020.
Here are the current top 10 holdings of NOBL as of 01/10/2020.
Top 10 Holdings NOBL
- Leggett & Platt
- Air Products & Chemicals
- Cardinal Health
- Walgreens Boots Alliance
- Illinois Tool Works
- Hormel Foods
- Rowe Price Group
If you are looking for highly attractive stocks to include in your portfolio today, it’s good to consider those that qualify as Dividend Aristocrats. These stocks can be extremely helpful for investors looking to generate sustainable long-term income, as they offer some of the safest dividends available in the stock market.
They also tend to be less volatile than growth stocks, thus helping reduce risk and diversify your overall portfolio. In addition, these companies also generally outperform the broader equities market, especially during recessions.
However, just because they are on this list does not mean that you should be trading them all. Before you buy any stock, it is always advisable to do some due diligence.
But overall, Dividend Aristocrats offer investors market-beating returns, good yields, and outstanding dividend growth, all with very minimal volatility and risk. What’s more, one can own them all with one exchange traded fund such as the ProShares S&P 500 Dividend Aristocrats (NOBL).