What are Dividend Aristocrat stocks?
What are Dividend Aristocrat stocks?
By: Stacey Nickens
Income-oriented investors often look for stocks with strong dividend yields and consistent dividend payments. Investing in a stock with those attributes can allow you to maintain a fairly consistent income stream in your investment portfolio, regardless of broader market volatility. In looking for income-paying stocks, you may come across a series of stocks known as the Dividend Aristocrats.
What companies are included on the Dividend Aristocrat list?
A Dividend Aristocrat is any S&P 500 company that has both paid and increased its dividend each year during the past 25 consecutive years. The S&P 500 periodically updates the list. As of June 2022, there were 65 Dividend Aristocrats, including such companies as Procter & Gamble (PG), Coca-Cola (KO), and Johnson & Johnson (JNJ).
Some Dividend Aristocrats will graduate to the level of Dividend Kings. Dividend Kings have increased their dividends annually during the last 50 consecutive years. The list currently features 44 companies, including Hormel Foods (HRL), Lowe’s (LOW), and Target (TGT).
What are the benefits of investing in Dividend Aristocrats?
Given the consistency of their payments, Dividend Aristocrats can be highly reliable income investments. Investors who are close to or in retirement can use Dividend Aristocrat stocks to make sure that they are earning sufficient dividends and that their income is unlikely to decrease significantly at the drop of a penny. Their income is likely to actually increase, as Dividend Aristocrats are required to raise their dividends in order to remain on the list. Not only that, many Dividend Aristocrat companies are industry leaders that consistently see reliable cash flows and annual returns. For those reasons and others, Dividend Aristocrats tend to be less volatile than the broader market.
What are the cons of investing in Dividend Aristocrats?
Typically, when you invest in a more reliable asset, you’re trading growth for greater consistency, and the same is true when investing in Dividend Aristocrats. As measured by the performance of the ProShares S&P 500 Dividend Aristocrats ETF (NOBL), the returns of Dividend Aristocrat stocks have consistently trailed behind the S&P 500 since 2020.
Are Dividend Aristocrats right for you?
To determine the best investments for your portfolio, you need to consider the entire picture: your income and growth needs, your financial goals, your time horizon, and other factors. Reach out to our experienced investment team today to discuss the best investment options for you and your portfolio.
