Dividend Investing with the S&P 500 Dividend Aristocrats

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One of the ways to generate passive income is through dividend investing. But where do you start? Stock picking is a term that many of us are wary of; however, there are ways to choose solid stocks for your income portfolio. One way to find the best dividend stocks is to start with the Dividend Aristocrats.

Dividend Investing with the S&P 500 Dividend Aristocrats 1

What are Dividend Aristocrats?

Dividend Stocks

Dividends stocks are those that pay out a portion of profits that companies receive. The amount of dividend you get from your investment is based on how many shares you own, the stock price, and the dividend yield.

Dividend = Stock Price x Dividend Yield x Number of Shares

The higher these three numbers are the larger your dividend payments.

Stocks that pay dividends do so regularly; dividends can be increased or decreased — or stopped altogether. When you choose a dividend stock, you might find that the company slashes its dividend soon after, reducing the income you get from the stock. This is why, when choosing dividend stocks, many investors gravitate toward Dividend Aristocrats.

Dividend Aristocrats

Dividend Aristocrats are stocks that have increased their dividend every year for 25 years. Some Dividend Aristocrats have been increasing dividends each year for more than 55 years!

Of course, the dividend increase needn’t be huge to qualify. But, the fact that a company has continued to increase its payout through recessions and stock market crashes means something.

Dividend Aristocrats are generally considered to be solid companies. They have good enough management, and enough cash reserves, to continue upping the payouts through good times and bad. Additionally, these are companies that are likely to continue to grow — or at least remain bastions of American business. Companies like Coca-Cola (KO), Johnson & Johnson (JNJ) and Target (TGT) are Dividend Aristocrats.

Of course, once you cut your dividend, or fail to raise it, you are off the list.

Dividend Aristocrats are companies that have a good chance of seeing you through the turbulence of the market and providing you with dividend income, on top of steadiness in stock gains over time (although these gains aren’t going to be dramatic).

How to Invest in Dividend Aristocrats

There are different ways to start investing in Dividend Aristocrats.

Of course, you first have to find out what companies fall into this category. One of the easiest ways is to check which companies are on the S&P Dividend Aristocrats list (the full list is reproduced below for your convenience). This will give you an idea of which companies to target.

1. Individual Stocks

You can purchase shares in companies either through a stockbroker (including using an online brokerage) or through direct stock purchase plans that many companies offer.

The individual stocks method allows you to pick and choose which companies you want to invest in and how much you want to invest in each.

2. ETFs

You can also purchase an ETF, like NOBL by ProShare, which tracks the entire index.

ProShares S&P 500® Dividend Aristocrats ETF seeks investment results, before fees and expenses, that track the performance of the S&P 500® Dividend Aristocrats® Index.

A Word of Caution…Lack of Diversification

The one thing that I am cautious about dividend investing using only Dividend Aristocrats is the lack of diversification. For example, if we invest equally in all 57 stocks, we can see that our portfolio will be concentrated mainly in US Large-Cap and most of them are concentrated in 6 sectors (chart and data from the Portfolio X-Ray tool).

Dividend Aristocrats by Sector
Dividend Aristocrats by Sector screenshot was taken July 2019

If you ended up handpicking a few stocks from the list of 57, your portfolio diversification gets even worse. This might not be a problem for some investors, but I feel this is a real risk that you have to consider.

The S&P Dividend Aristocrats List for July 2019

Currently, there are 57 companies that meet the Dividend Aristocrats requirement, i.e., stocks that have increased their payouts every year for 25 years.

Note: Yield figures are as of July 20, 2019. You can see a sortable list of 2019 Dividend Aristocrats at SureDividend.com (you can also download a spreadsheet there).

TickerNameDividend Yield
MMM3M Co.3.2%
AOSA. O. Smith Corp.1.8%
ABTAbbott Laboratories1.4%
ABBVAbbVie, Inc.5.9%
AFLAflac, Inc.1.9%
APDAir Products & Chemicals, Inc.2.0%
ADMArcher-Daniels-Midland Co.3.4%
TAT&T, Inc.6.1%
ADPAutomatic Data Processing, Inc.1.8%
BDXBecton, Dickinson & Co.1.2%
BF.BBrown-Forman Corp.1.2%
CAHCardinal Health, Inc.4.2%
CATCaterpillar, Inc.2.5%
CBChubb Ltd.1.9%
CVXChevron Corp.3.7%
CINFCincinnati Financial Corp.2.0%
CTASCintas Corp.0.8%
CLXThe Clorox Co.2.4%
KOThe Coca-Cola Co.3.0%
CLColgate-Palmolive Co.2.3%
EDConsolidated Edison, Inc.3.3%
DOVDover Corp.2.0%
ECLEcolab, Inc.0.9%
EMREmerson Electric Co.3.0%
XOMExxon Mobil Corp.4.3%
FRTFederal Realty Investment Trust3.1%
BENFranklin Resources, Inc.2.8%
GDGeneral Dynamics Corp.2.1%
GPCGenuine Parts Co.2.9%
HRLHormel Foods Corp.1.9%
ITWIllinois Tool Works, Inc.2.5%
JNJJohnson & Johnson2.8%
KMBKimberly-Clark Corp.2.9%
LEGLeggett & Platt, Inc.3.9%
LINLinde Plc1.7%
LOWLowe’s Cos., Inc.1.8%
MKCMcCormick & Co., Inc.1.4%
MCDMcDonald’s Corp.2.0%
MDTMedtronic Plc2.0%
NUENucor Corp.2.9%
PBCTPeople’s United Financial, Inc.4.3%
PNRPentair Plc2.3%
PEPPepsiCo, Inc.2.8%
PPGPPG Industries, Inc.1.6%
PGProcter & Gamble Co.2.5%
ROPRoper Technologies, Inc.0.5%
SPGIS&P Global, Inc.0.9%
SHWThe Sherwin-Williams Co.0.8%
SWKStanley Black & Decker, Inc.0.0%
SYYSysco Corp.2.1%
TROWT. Rowe Price Group, Inc.2.6%
TGTTarget Corp.2.9%
UTXUnited Technologies Corp.2.2%
VFCVF Corp.2.2%
GWWW.W. Grainger, Inc.2.0%
WMTWalmart, Inc.1.8%
WBAWalgreens Boots Alliance, Inc.3.2%

Bottom Line

If you are putting together an income portfolio, it might be worth it to consider Dividend Aristocrats as your starting point. You can also use other investing tactics to help enhance your portfolio performance. For example, you can set up dollar cost averaging to keep you steadily buying more shares as you add money to your portfolio, and set up an automatic Dividend Reinvestment Plan to invest your dividend payments into additional shares.

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Adam WIlliams
Adam WIlliams
12 years ago

What does the Yield mean on your table?

9 years ago

Pinyo, assuming stock prices are fairly equal, is there a reason why investors would not always pick the stock with the highest yield?

Dividend Investing with the S&P 500 Dividend Aristocrats

by Pinyo Bhulipongsanon time to read: 4 min
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