Dividend Aristocrats of the USA 2022

Dividend Aristocrats of America are companies raising their dividends for more than 25 years.

What are Dividend Aristocrat Stocks?

Why is everyone interested in Aristocrats? They are the best stocks for investors looking to get stable, growing dividends. They are recognized leaders whose credibility is based on a long history of payments.

It’s not just the number that matters but also what’s behind it. Only a high-quality business allows you to maintain a long payout history that exceeds market averages. All companies from the list of dividend aristocrats are either leaders in their segments or have a strong competitive advantage that allows them to hold on to the market for a place “under the sun”.

In different periods, the Index included 170 companies. However, there have never been more than 70 of them at a time. Today, the Index sets a record for the number of participants – 64 points.

Technical information

• Index name: S&P 500® Dividend Aristocrats®;
• Price ticker: SPDAUDP;
• Total Yield ticker: SPDAUDT;
• The method of” weighing ” companies: Equivalent;
• Refresh Rate: Rebalancing quarterly in January, April, July and October;
• Launch Date: May 2, 2005.

HOW TO BUY STOCKS OF AMERICA’S DIVIDEND ARISTOCRATS?

You need to open a brokerage account, transfer money, and make a purchase.

You can try to buy each stock from the list in turn. But there is no need to do that today. You can buy them in one go. Since 2003, the ProShares S&P 500 Aristocrats (NOBLE) Dividend Aristocrats ETF has been in existence.

Fund managers create a portfolio with a complete list of participants in practice. Then, by buying a stake in the fund, the investor owns all the Dividend Aristocrats.

As soon as one of the companies ceases to meet the criteria for participation in the Index or a new worthy candidate appears, the fund manager changes participants without attracting an investor. The latter’s task is to continue to own the fund.

Technical information about the ETF

• Name of the ETF fund: ProShares S&P 500 Aristocrats;
• Fund’s ticker: NOBLE;
• Launch Date: October 9, 2013;
• Fund commission: 0.35% per year.

HISTORY OF CREATION

The new Index was launched in May 2005. It was invented by Standard and Poors, the same company that calculates the most famous Index of the American stock market-the S&P 500.

S&P invented the selection concept, compiled a list of companies, and studied historical data. She calculated who had been an aristocrat in the past and how Index had behaved before his birthday. For the first calculation date, we took December 29, 1989. Thus, today we have official statistics for more than 30 years.

METHOD FOR SELECTING SHARES

The methodology for selecting the dividend aristocracy includes several requirements.

A company is included in the Index if it

• Increases the annual amount of dividend payments per share continuously for at least 25 consecutive years;
• It is part of the S&P 500 index (large business);
• Has a capitalization (Free-float) of at least $3 billion as of the rebalancing date;
• Has an average daily turnover (ADVT) of at least $5 million during the three months preceding the rebalancing date.

In addition to the candidates’ requirements, S&P makes sure that the Index is balanced. It must maintain diversification by economic sector and by the number of companies.

The threshold values are as follows

1. The Index must include at least forty shares. If there are fewer of them, then apply allowances for the number of years of dividend growth;
2. Restrictions on industry diversification: no more than 30% per industry according to the GICS classification.

Special dividends are not considered when calculating the amount of annual income. An unscheduled one-time bonus can not bring down the length of service.

The list of participants is updated every year at the end of January. And during the year, rebalancing is carried out in January, April, July and October.

THREE ADVANTAGES OF DIVIDEND ARISTOCRATS

Companies selected based on the dividend principle often give higher returns than the market for the following reasons

1. The first advantage is that a Company with growing dividends can create stable profits and significant cash flows. Only in this case it can regularly please shareholders. The list does not include enterprises at the initial stages of development: startups or companies of the growth period. Companies with unreliable or failed business models are also excluded. No high-risk shares;
2. The second advantage is that businesses should be more careful and selective in further development. Top management is cautious about investing in innovation and opening up new areas. After all, the company can not be mistaken; it pays part of its cash flows in dividends. Without undue creativity, we get a transparent and predictable result;
3. The third plus point is that the growing 25-year payouts are not coincidental. It is a sign of a stable dividend policy. Management is committed to attracting investors with regular payments and is generally friendly to shareholders.

PRICE YIELD

Investing in the S&P Dividend Aristocrats index gave a better return than the S&P 500 index for 30 years and showed 12.67% per annum.

In recent years, aristocrats have started to lag slightly as tech stocks, many of which do not pay dividends, have significantly outperformed other sectors. Their growth affected the entire S&P 500, and it took the lead. Unfortunately, the aristocrats could not repeat the success because they had only one technology company – Automatic Data Processing (ADP), with a weight of 2% of the Index.

CRISIS RESILIENCE

American Aristocrats were able to break away mainly due to periods of market decline (2000-2002, 2008). During recessions, their shares fell in value less than the 500 largest companies in the United States. So in 2008, the Dividend Aristocrats Index declined by 22%, and the S&P 500 – by 38%.

Great businesses with strong strengths generate stable cash flows, maintaining their market share while the weaker ones struggle to survive the economic downturn.

However, many aristocrats are opposed to an even more extensive list of those who have dropped out of the elite. The most robust turns that dividend champions took were during the crisis. Let’s analyze the ability of companies to stay on the list using one of these periods as an example.

Over the past seventy years, the crises of the American stock market include the years: 1953, 1958, 1960, 1970, 1973, 1980, 1990, 2001, 2008, 2012 and 2020. So if we get a company with more than 25 years of experience, it means that it has survived at least four of them without reducing payments.

The biggest dividend crisis is the 2008-2009 two-year period. The total drawdown of dividend income in these years was 23%. It is not as significant as the price drop – the S&P is down 57% – but more than in any other period before that.

The analysis of the 2008 crisis is also good because the crisis was not so long ago. It is closer to our present-day realities; therefore, its results can be pretty applicable to predict the repetition of the situation.

At the end of 2007, 60 companies were on the list of Dividend Aristocrats. Over the next two years, 28 of them left the Index either because of a reduction in dividends, cancellation of payments, or freezing or because of the purchase of a company or a business merger with another participant in the stock market.

It should clarify that freezing means that when dividends remain at the same level, the company is excluded from the list since it must grow yearly to maintain a continuous stay. 

Despite the diverse fate of the participants in the 2007 list, none of those companies went bankrupt. It means that no matter which stock the investor chooses, they would not lose their money to zero. It confirms the importance of the aristocrats as reliable support for the conservative strategy.

This period is an example of the most negative situation when buying dividend aristocrats.  

SIX DISADVANTAGES OF DIVIDEND ARISTOCRATS

1) The rate of dividend growth will not be high

The Index adheres to selecting shares based on 25 years of dividend growth experience. The company must pay more significant dividends in dollars each year than in the previous year. But this does not indicate the rate of growth of payments. If you raise your premium by 1 cent each year, you can formally meet the criteria and continue to be listed. In other words, the Index does not take into account dividend growth. Such a move is not in the interests of investors. They are unlikely to like owning a company whose dividend growth is no higher than the inflation rate.

Examples of Dividend Aristocrats with Slow Dividend Growth

• Nucor Corporation (NUE): An American steel company that has raised its dividend for 46 consecutive years, with average 10-year dividend growth of 1.29%;
• Emerson Electric Co. (EMR): A large multinational corporation in the United States raised its dividend for 24 consecutive years, with average 3-year dividend growth of 1.12%.

By owning them, you get less and less post-inflationary income.

2) Disputed criteria

Let’s look at the criteria for selecting companies. If such a criterion as “dividend growth in 25 years” sounds quite reasonable and helps to choose the best companies, then the requirements for “participation in the S&P 500 index”, and even more so for “average daily turnover and capitalization”, are no longer so obviously applicable.

If a company increases its dividend for 25 years, we know we deal with a reliable business. So does it matter whether it is part of another index or not? Or how important should it be to a private investor that the market turnover of shares is $5 million and not, say, 3 or 1?

A significant turnover is necessary for the fund to create high liquidity for its constituent shares. It allows you to attract substantial capital and provide the required assets. But these requirements are not so crucial for a private investor. They do not guarantee an improvement in the quality of the portfolio.

The Index leaves out worthy candidates and weakens diversification by introducing unnecessary criteria.

3) Slow updating of the list

Payment of dividends is a voluntary decision of companies. Each can refuse further payments or reduce the amount at any time. No top management will continue to give away money if the business’s continued existence depends on this money. No previous experience and participation in an authoritative list will stop you.

It must immediately exclude the company from the aristocrat’s list in violating the dividend seniority. However, the composition of companies is reviewed once a year; rebalancing takes place once a quarter. Therefore most of the time, investors do not see the last data.

4) There are no guarantees of payment growth

The fact that the Index contains stocks with dividends increases does not guarantee that the investor’s rental income will grow annually.

After violating the length of service, companies are excluded from the list. Still, those who remain or come to replace them can collectively pay smaller dividends than their predecessors.

In practice, this does lead to a visible negative effect

• For example, aristocrats’ (NOBLE) dividend income for 2018 was $1,4361 per share.
• Dividend income for 2019 was $1.43 per share.
• Revenue for the year decreased by 0.42%

(The result may also be affected by one-time dividend payments).

5) Lower dividend yield

America’s Dividend Aristocrats are the best dividend stocks in the S&P 500 index. But, at the same time, the dividend yield of the Aristocrats ‘ ETF may at times fall below the S&P 500’s dividend yield. It happens because investors value the reliability of Aristocrats and invest heavily in the fund, thereby pushing the price up to and lowering the dividend yield.

At one time, the Aristocrats’ dividend yield (NOBLE) was 2.20%

And the S&P 500 dividend yield (IVV) is 2.33%

6) Low diversification

About 60 companies have been included in the list in recent years. It is one of the numerous minor indexes of the American stock market in terms of composition. The quality of each participant makes it stable. But a small number makes the results depend on each of them.

You can get around the shortcomings by adjusting the selection criteria. This more detailed list is called the list of Dividend Champions. We have already talked about them earlier (see the link).       

FOUR CASES HAVE STUMPED INVESTORS

Compliance with diversification by sector, the number of participants, and the development of conditions for including companies in the Index of Dividend Aristocrats may not lead to the investment results that the investor expects.

The problem is that there are difficulties calculating the dividend length of service. They often occur in the case of a merger or when choosing the period for accounting for dividends.

Here are some examples from the history of non-obvious situations

• The first case will tell you about the division of the business. Suppose a company is included in the Index, and there is a legal division, for example. In that case, some direction is allocated in a separate legal entity. How should I treat the dividend experience of a new participant? In 2008, Altria Group (MO) split from Kraft Foods. The new company immediately began paying dividends, but its size was less than before the division. The total amount paid by both Altria and Kraft in 2008 was higher than in 2006 and 2007. Despite this, it should not include Altria in the Index.
• It seems that S&P does not consider the firm’s past dividend experience. The principle is straightforward. The company is bifurcated; the Aristocrats have no dividend history or access. However, when another Abbott company split into Abbott (ABT) and Abbvie (ABBV) in 2013, both members were left on the list. Here we can see that the selection rules change from time to time, which the investor may not know about.
• The following story is about Colgate-Palmolive (CL). It has rewarded shareholders with increasing payouts yearly for 49 consecutive years but has only been added to the Index since 2011. Here, S&P changed the rule of accounting for one-time dividends in the number of payments, making the company worthy of participating in this honorary rating.
• Another case is related, on the contrary, to early access. In 2010, it added Ecolab (ECL) to the Index. Unfortunately, the firm has only increased its dividend for 17 consecutive years. Nevertheless, it did not prevent her from getting into the elite. It can include companies in the list if the number of years is insufficient, but it is unclear why it gave such a young company.
• And the last thing we will analyze is the incident with the steel company Nucor (NUE). In the mid-2000s, Nucor achieved record profits and began paying significant special dividends every quarter. Due to the recession in 2008 and lower steel prices, the company abandoned its special bonus. Nevertheless, it increased its payouts to shareholders, albeit slower than before. From 2009 to 2011, S&P removed the stock from the list of Dividend Aristocrats. In 2020, Nucor raised its quarterly dividend for the 46th consecutive year.

Although the Index has a list of criteria, they continue to change, which may be justified. Still, it is challenging to analyze the Index results and makes its use somewhat unpredictable.

UPDATED LIST OF DIVIDEND ARISTOCRATS FOR JANUARY 2022    

So, dividend аaristocrats are a select group of stocks in the S&P 500 index that pay regular dividends and regularly increase them for more than 25 consecutive years.

These shares are some of the most reliable dividend stocks in the stock market and have a great history of regular cash payments, proven by long history and time.

As of the beginning of 2022, we had 65 dividend aristocrats, and each has its long history of ups and downs.

There is an easy and easy way to invest in all aristocrats simultaneously by purchasing a Dividend Aristocrats ETF, called the Dividend Aristocrats (NOBLE) ETF.

For the year, the NOBLE ETF brought investors a considerable 21.7%. Yes, some may seem too unconvincing, but this is a return with minimal risk, proven for decades.

Short-term profit is mostly luck. Therefore, it should evaluate performance for at least three or more extended periods or decades.

Slightly higher returns, even though such stocks have significantly lower volatility- this is every long-term investor’s golden mean!

Transcontinental large corporations always have a stable business model, which consistently generates significant cash flows in different markets, even in recessions and crises worldwide. Moreover, it essentially sets them apart from other competitors, leaving them far behind, thus allowing them to capture more and more new markets no matter what.

Such enterprises, as a rule, pay stable dividends to their shareholders, choose options for further development more carefully, and invest profits in other projects with extreme caution.

Shares on which dividends are paid are ready to reward shareholders with cash payments. It is a sign that management is favourable to shareholders.

It must have a definite competitive advantage to increase its dividend for 25 consecutive years.

Dividend Aristocrats with the Biggest Dividends

1. Exxon Mobil (XOM) – 5,78%;
2. International Business Machines Corporation (IBM) – 4,82%;
3. Chevron Corporation (CVX) – 4,57%;
4. AbbVie Inc. (ABBV) – 4,17%;
5. Realty Income Corporation (O) – 4,13%;
6. Leggett & Platt, Incorporated (LEG) – 4,07%;
7. Amcor plc (AMCR) – 4,01%;
8. People’s United Financial, Inc. (PBCT) – 3,99%;
9. Cardinal Health, Inc. (CAH) – 3,77%;
10. Walgreens Boots Alliance, Inc. (WBA) – 3,66%.

Dividend aristocrats with the most extended payout history

1. Illinois Tool Works Inc. (ITW) – 55 years yield 2.0%;
2. Colgate-Palmolive Company (CL) – 56 years, yield of 2.13%;
3. Johnson & Johnson (JNJ) – 56 years, yield 2.48%;
4. Lowe’s Companies, Inc. (LOW) – 56 years, yield 1.25%;
5. The Coca-Cola Company (KO) – 57 years, yield 2.84%;
6. Cincinnati Financial Corporation (CINF) – 59 years, yield 2.23%;
7. 3M Company (MMM) – 60 years, yield 3.33%;
8. Emerson Electric Co. (EMR) – 62 years, yield 2.22%;
9. The Procter & Gamble Company (PG) – 62 years, yield of 2.13%;
10. Genuine Parts Company (GPC) – 63 years, yield 2.36%.

Complete list of dividend aristocrats for the beginning of 2022

№	Ticker	Company name	Cost, $	Dividend inc., %
1.	ABBV	Abbvie Inc	135,42	4,2
2.	AOS	A.O. Smith Corp.	83,57	1,3
3.	MMM	3M Co.	177,74	3,3
4.	ABT	Abbott Laboratories	139,04	1,4
5.	AFL	Aflac Inc.	58,27	2,7
6.	APD	Air Products & Chemicals Inc.	295,81	2,0
7.	ADM	Archer Daniels Midland Co.	67,89	2,2
8.	ADP	Automatic Data Processing Inc.	244,01	1,7
9.	ALB	Albemarle Corp.	236,67	0,7
10.	BF.B	Brown-Forman Corp.	71,59	1,0
11.	BDX	Becton, Dickinson And Co.	253,21	1,4
12.	CAT	Caterpillar Inc.	207	2,1
13.	CAH	Cardinal Health, Inc.	52,01	3,8
14.	CVX	Chevron Corp.	119,26	4,5
15.	CB	Chubb Limited	191,44	1,7
16.	CINF	Cincinnati Financial Corp.	113,11	2,2
17.	CTAS	Cintas Corporation	424,09	0,9
18.	CLX	Clorox Co.	174,93	2,7
19.	KO	Coca-Cola Co	59,3	2,8
20.	CL	Colgate-Palmolive Co.	84,59	2,1
21.	ED	Consolidated Edison, Inc.	85,13	3,6
22.	DOV	Dover Corp.	178,33	1,1
23.	ECL	Ecolab, Inc.	229,83	0,9
24.	EMR	Emerson Electric Co.	91,76	2,2
25.	XOM	Exxon Mobil Corp.	63,54	5,5
26.	FRT	Federal Realty Investment Trust	136,72	3,1
27.	BEN	Franklin Resources, Inc.	33,41	3,5
28.	GD	General Dynamics Corp.	207,46	2,3
29.	GPC	Genuine Parts Co.	137,93	2,4
30.	HRL	Hormel Foods Corp.	49,13	2,1
31.	ITW	Illinois Tool Works, Inc.	243,48	2,0
32.	JNJ	Johnson & Johnson	171,54	2,5
33.	JNJ	Johnson & Johnson	171,54	2,5
34.	LEG	Leggett & Platt, Inc.	41,24	4,1
35.	LIN	Linde Plc	338,64	1,3
36.	LOW	Lowe’s Cos., Inc.	255,51	1,3
37.	MCD	McDonald’s Corp	268,58	2,1
38.	MKC	McCormick & Co., Inc.	95,82	1,5
39.	MDT	Medtronic Plc	106,1	2,4
40.	NUE	Nucor Corp.	113,04	1,8
41.	PBCT	People’s United Financial Inc	18,29	4,0
42.	PNR	Pentair plc	70,99	1,2
43.	PEP	PepsiCo Inc	172,98	2,5
44.	PPG	Industries, Inc.	170,6	1,4
45.	PG	Procter & Gamble Co.	162,9	2,1
46.	ROP	Roper Technologies Inc	474,97	0,5
47.	SPGI	S&P Global Inc	461,1	0,7
48.	SHW	Sherwin-Williams Co.	339,12	0,6
49.	SWK	Stanley Black & Decker Inc	185,93	1,7
50.	SYY	Sysco Corp.	78,95	2,4
51.	TROW	T.Rowe Price Group Inc.	194,58	2,2
52.	TGT	Target Corp	231,95	1,6
53.	VFC	VF Corp.	73,71	2,7
54.	GWW	W.W. Grainger Inc.	510,2	1,3
55.	WMT	Walmart Inc	144,65	1,5
56.	WBA	Walgreens Boots Alliance Inc	53,06	3,6
57.	IBM	International Business Machines Corp.	136,04	4,8
58.	NEE	NextEra Energy Inc	91,66	1,7
59.	WST	West Pharmaceutical Services, Inc.	445,92	0,2
60.	AMCR	Amcor Plc	11,88	4,0
61.	ATO	Atmos Energy Corp.	105,01	2,6
62.	O	Realty Income Corp.	71,2	4,2
63.	ESS	Essex Property Trust, Inc.	353,86	2,4
64.	EXPD	Expeditors International of Washington, Inc.	130,79	0,9

To invest in these, and other popular dividend stocks you can open an account with one of the popular online brokers such as Interactive Brokers, Forex.com, Plus500, eToro or AvaTrade.

CONCLUSION

Dividend Aristocrats of America is a list of elite companies with reliable businesses. It had a difficult path and confirmed its status as an investment pillar with twenty-five years of continuous dividend growth.

Not only do dividend investors seek to buy Aristocrats to create a long-term source of passive income, but investors are focused on increasing the share price. As a result, the total return on the Index exceeds the performance of the more general S&P 500 index list over its 30-year history. There is hardly a better way for the unsophisticated investor to start earning dividends from the American stock market than with Aristocrats.

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