Dividend Aristocrats

Dividend aristocrats are firms that have settled dividend payments to investors throughout the last 25 years with increased payouts. They are utilized as a part of the defensive equity plan to offer lower-risk yields. Also, investors may check the list of best dividend aristocrats in the US and finance them through exchange-traded funds (ETFs) or individual purchases.

To be a dividend aristocrat, the organization must certainly be a part of the S&P 500, an index tracking the 500 biggest companies recorded on the stock exchange. Moreover, the establishment failing a single dividend increment must wait 25 years to be returned to the listing.

Table of contents

• What is Dividend Aristocrats?
  • Dividend Aristocrats Explained
  • How To Invest in Dividend Aristocrats
  • Examples
    • Example#1
    • Example#2
  • Advantages And Disadvantages of Dividend Aristocrats
    • Advantages
    • Disadvantages
  • Frequently Asked Questions (FAQs)
  • Recommended Articles
• Dividend Aristocrats are publicly traded corporations (a part of the S&P 500) with consistent dividend remittances to their shareholders for the past 25 years.
• Investors can put their money in these stocks through either individual share buying or exchange-traded funds (ETFs).
• The dividend aristocrats list incorporates Caterpillar, Cintas, Coca-Cola, Johnson & Johnson, McDonald’s, PepsiCo, Procter & Gamble, and S&P Global.
• Its benefits include lesser price volatility, fixed income growth, and quicker portfolio building. Additionally, the disadvantages are lack of control, time-consuming firm growth, and usually unimaginative.

Dividend aristocrats might not inevitably possess the highest dividend income but are normally sustainable, stable, and have gradually increased over time. Moreover, they are appropriate for investors needing constant income to support their lifestyle and expenditure. Please note that they commonly entice pensioners to prioritize earnings above capital gains.

To clarify, new businesses are included every year after touching the 25-year mark. Also, their main objective in the portfolio is to keep a steady dividend payout ratio across the long duration. Furthermore, the stockholder can fund these stocks through online and conventional brokerage accounts or ETFs.

Young entrepreneurs must certainly add the best dividend aristocrats to their portfolios and exploit the potential of compound interest and time to reinvest the received dividends for portfolio growth. But, above all, investors must contemplate the financial goals and role of these stocks and ensure the portfolio’s conformity with their long-term targets.

Please note that these investments must mirror the investor’s criteria for productive results. Above all, these stocks demonstrate firms in the stock market with stable proceeds, robust fundamentals, and a solid background of profit and development.

Please note that everal investors prefer to purchase funds holding these stocks to add them to their portfolios. While they can finance an individual enterprise, portfolio diversification is a better option through mutual funds, ETFs, or unit investment trusts (UITs). Moreover, this helps them gain extensive exposure to several such firms.

As aforementioned, investors may invest in these stocks via online and traditional brokerages. Typically, they must purchase its total shares, but a few brokerages like Fidelity, Schwab, Robinhood, and M1 Finance also permit fractional share purchases.

Please note that purchasing dividend aristocrats ETF may assist the investors in easier and cheaper funding. Even when buying fractional shares, ETFs are more efficient and convenient. Also, the investors can purchase these stocks from a sole source rather than purchasing 65 stock slices per investment.

Investors must thoroughly research before buying shares of these stocks in specific firms from the list. While these stocks surge dividends annually, they pay different amounts or raise dividends at unprecedented rates. Therefore, investors must keenly analyze the dividend history of all organizations.

So, here are a few examples of the same. 

Example#1

To clarify, the below-mentioned are the top 10 of the 65 firms registered on the S&P 500 dividend aristocrats list (as of October 7, 2021).

Example#2

The financial services firm S&P Global (SPGI) is among the much-talked-about US dividend aristocrats whose stocks have fallen 25% year to date. Therefore, it is the perfect opportunity for investors to purchase its shares at a 25.7 price-to-earnings ratio (P/E). This level has not been witnessed since early 2019.

Please note that it delivers investors an impressive dividend earning of 0.89% with consistent dividend growth for the last 48 years. In addition, it is only two years away from joining the Dividend Kings group. In other words, SPGI has a robust competitive edge in the rating business and comprehensive income sources through other channels.

Lastly, its business structure is asset-light, implicating low operational expenditures with high margins.

To clarify, the following are the advantages and disadvantages of US dividend aristocrats:

Advantages

1. They certainly display consistent, blue-chirp corporations with an extended history of vital funds and dividend increments.
2. Additionally, these stocks offer fixed revenue growth.
3. In other words, they tend to possess lower price volatility.
4. Please note that dividend investing supporters prefer a credible income source.
5. They are sufficiently stable for continuous annual dividend increments across decades, certainly even through recessions.
6. Above all, it helps quicker portfolio building through reinvestment in these stocks.
7. They certainly ensure successful long-term investing.
8. Regarded as among the most famous investment strategies, they relish extensive consumer confidence.

Disadvantages

1. To clarify, they are considered taxable earnings.
2. In other words, they offer a lack of control over their distribution timing.
3. Above all, these shares have underperformed S&P 500.
4. Company development certainly consumes a lot of time.
5. Additionally, they are subject to market fluctuations.
6. Moreover, they are considered unimaginative.

This article has been a guide to Dividend Aristocrats & its Definition. Here we explain the best dividend aristocrats list in the US (ETF & individual investments). You may also have a look at the following articles -

• Scrip Dividend
• Is Dividend an Expense?
• Types of Dividend Policies
• Dividends Ex-Date and Record Date
• Shareholders Loan