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What is a Dividend Aristocrat, and should I buy these stocks?

by | Last updated 26 Nov, 2022 | Dividends

Dividend Aristocrats are public companies that have consistently raised their dividends annually for at least 25 years.

In the United States, the S&P 500 Dividend Aristocrats index contains all of the American businesses that meet this criterion. However, to be a member of the exclusive group, there are additional requirements, including a market capitalisation of at least $3bn and an average daily trading value of a minimum of $5m.

How to invest in these stocks?

As an investor, I can choose to invest in single companies or take a more broad approach with an exchange-traded fund (ETF) that tracks the S&P 500 Dividend Aristocrat index.

Taking the index route allows me to diversify my portfolio in a single transaction instantly. However, by selecting individual stocks, I can tailor my portfolio to only what I believe are the best shares to own.

List of Dividend Aristocrats in 2022

As of June 2022, there are a total of 65 dividend aristocrats listed on the New York Stock Exchange and Nasdaq.

CompanyIndustryYears of Dividend IncreaseDividend Yield (%)
Walgreens Boots Alliance (NASDAQ:WBA)Consumer staples465.24
International Business Machines (NYSE:IBM)Information technology285.05
3M (NYSE:MMM)Industrials644.8
VF Corp. (NYSE:VFC)Consumer discretionary484.54
Realty Income Corporation (NYSE:O)Real estate284.39
Franklin Resources (NYSE:BEN)Financials404.34
Federal Realty Investment Trust (NYSE:FRT)Real estate544.11
AbbVie (NYSE:ABBV)Healthcare503.97
Amcor PLC (NYSE:AMCR)Materials393.88
T. Rowe Price Group (NASDAQ:TROW)Financials363.84
Kimberly Clark (NYSE:KMB)Consumer staples503.66
ExxonMobil (NYSE:XOM)Energy393.61
Chevron (NYSE:CVX)Energy353.5
Stanley Black & Decker (NYSE:SWK)Industrials543.49
Clorox (NYSE:CLX)Consumer staples353.19
Essex Property Trust, Inc. (NYSE:ESS)Real estate283.16
Consolidated Edison (NYSE:ED)Utilities483.1
Medtronic (NYSE:MDT)Healthcare452.95
Cardinal Health (NYSE:CAH)Healthcare362.87
Coca-Cola (NYSE:KO)Consumer staples602.82
Johnson & Johnson (NYSE:JNJ)Healthcare602.73
Cincinnati Financial (NASDAQ:CINF)Financials612.69
PepsiCo (NASDAQ:PEP)Consumer staples502.65
Procter & Gamble (NYSE:PG)Consumer staples662.59
Aflac (NYSE:AFL)Financials392.56
Illinois Tool Works (NYSE:ITW)Industrials582.52
Caterpillar (NYSE:CAT)Industrials292.49
Target (NYSE:TGT)Consumer discretionary502.48
Air Products & Chemicals (NYSE:APD)Materials402.46
Emerson Electric (NYSE:EMR)Industrials652.41
Colgate-Palmolive (NYSE:CL)Consumer staples592.41
Sysco (NYSE:SYY)Consumer staples532.33
Atmos Energy Corporation (NYSE:ATO)Utilities382.28
Hormel Foods (NYSE:HRL)Consumer staples562.21
Genuine Parts (NYSE:GPC)Consumer discretionary662.19
General Dynamics (NYSE:GD)Industrials252.14
McDonald’s (NYSE:MCD)Consumer discretionary452.12
Lowe’s (NYSE:LOW)Consumer discretionary482.03
A.O. Smith (NYSE:AOS)Industrials301.99
PPG Industries (NYSE:PPG)Materials501.88
NextEra Energy Inc. (NYSE:NEE)Utilities281.87
McCormick & Co. (NYSE:MKC)Consumer staples361.82
Archer-Daniels-Midland (NYSE:ADM)Consumer staples491.81
Pentair (NYSE:PNR)Industrials461.77
Abbott Laboratories (NYSE:ABT)Healthcare501.72
Automatic Data Processing (NASDAQ:ADP)Information technology471.71
Chubb (NYSE:CB)Financials291.69
Walmart (NYSE:WMT)Consumer staples491.62
Linde (NYSE:LIN)Materials291.59
Dover (NYSE:DOV)Industrials661.55
Nucor (NYSE:NUE)Materials491.41
Becton, Dickinson & Co. (NYSE:BDX)Healthcare501.32
Expeditors International of Washington, Inc. (NASDAQ:EXPD)Industrials291.28
Church & Dwight (NYSE:CHD)Consumer Staples261.28
W.W. Grainger (NYSE:GWW)Industrials511.21
Ecolab (NYSE:ECL)Materials301.17
Cintas (NASDAQ:CTAS)Industrials381.07
Brown-Forman (B Shares) (NYSE:BF.B)Consumer staples381.03
Sherwin-Williams (NYSE:SHW)Materials440.99
S&P Global (NYSE:SPGI)Financials490.92
Brown & Brown (NYSE:BRO)Financials280.63
Roper Technologies (NYSE:ROP)Industrials290.61
Albemarle Corp. (NYSE:ALB)Materials280.53
West Pharmaceutical Services, Inc. (NYSE:WST)Healthcare290.23

Dividend Aristocrats versus Dividend Kings

Another group of even more prestigious income stocks are Dividend Kings. A dividend King is a company that has managed to raise its dividend consecutively for at least 50 years.

Needless to say, this is quite a difficult feat to pull off. And so, the list of stocks that fall under this category isn’t long. In fact, as of July 2022, there are only 41 companies in the United States that have this title.

Additional titles include:

  • Dividend Challengers – Increased dividends for at least five years consecutively.
  • Dividend Achievers – Increased dividends for ten years consecutively.
  • Dividend Contenders – Increased dividends for at least ten years consecutively.
  • Dividend Champions – Increased dividends for 25 years consecutively.

Why invest in these dividend-paying companies?

One of the most important factors to any income investor when making an investment decision is consistency.

All too often, a seemingly promising dividend stock can announce a sudden change in the payout policy, whether it be a cut, temporary suspension, or outwrite cancellation.

Dividend Aristocrats are not immune to these risks. After all, they are just businesses, and sometimes things can go south either from internal or external factors.

However, having a long multi-decade track record of systematically delivering dividend growth does indicate these established enterprises are fundamentally sound and have reliable cash flows.

Even if growth in the share price is stagnant to the point where they often underperform versus a benchmark index, the continual increase in annual dividends can generate substantial returns for patient investors who buy and hold for the long term.

Just look at Warren Buffett’s investment in Coca-Cola back in 1988. After almost four decades of owning the stock, during which the dividend payout has increased every year, the annual dividend yield received on that single position in 2022 reached an extraordinary 52%!

Should I invest in Dividend Aristocrat stocks?

Dividend Aristocrats might not be the highest-yielding dividend stocks around today. But the underlying businesses have proven themselves stable, sustainable, and capable of continuous growth.

Executing the dividend investing strategy is unlikely to deliver stellar share price performance. But for investors seeking a steady stream of passive income, these proven stocks are arguably some of the best investments to choose from. At least, that’s what I think.

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Saima Naveed does not own shares in any of the companies mentioned. The Money Cog has no position in any of the companies mentioned at the time of writing. Views expressed on the companies and assets mentioned in this article are those of the writer and therefore may differ from the opinions of analysts in The Money Cog Premium services.

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