Dividend Aristocrats, Kings & Other Stock Market Royalty

When it comes to investing, most of my money is in a Vanguard fund or ETF. It’s not nearly as simple as a three-fund portfolio but it’s pretty close. However, there is a little piece of it in some stocks because we all need to live a little.

To scratch that stock picking itch in the most responsible way possible, I built a dividend growth portfolio. It’s nothing flashy, but after ten years, it’s grown considerably. It now provides a nice monthly cash flow even though I didn’t design it to be a monthly dividend paycheck!

I didn’t pick any old dividend funds, I started with dividend royalty.

Dividend Aristocrats

Dividend Aristocrats are companies in the S&P 500 that have increased their dividends every year for twenty-five years straight. The list itself is maintained by the S&P and updated every year.

Consider the criteria for a second – the companies on the list have all increased their dividends each year for at least twenty-five years. If your company only maintains the dividend, you drop off the list. If you pause the dividend, see ya later. You have to increase it each year (if only by a penny) and you can’t miss for at least twenty-five years.

It’s a high bar.

If you think back to all the financial and economic events of the last twenty-five years, they include the 2008-2010 Great Recession as well as the 2001 Dot-Com Bust. In fact, in 2009, nine companies fell from the Dividend Aristocrats list (two were added, Bemis and Leggett & Platt). In 2010, ten more fell with only one addition (Brown Forman).

Which Companies are Aristocrats?

For 2020, we had seven additions and no deletions. There are 64 Dividend Aristocrats.

Here is the full list of Dividend Aristocrats as of March 2020:

  1. AbbVie Inc. (ABBV)
  2. Abbott Laboratories (ABT)
  3. Archer-Daniels-Midland Co. (ADM)
  4. Automatic Data Processing Inc. (ADP)
  5. Aflac Inc. (AFL)
  6. Albemarle Corp (ALB) – New for 2020!
  7. Amcor PLC (AMCR) – New for 2020!
  8. A.O. Smith (AOS)
  9. Air Products and Chemicals Inc. (APD)
  10. Atmos Energy Corp (ATO) – New for 2020!
  11. Becton, Dickinson and Co. (BDX)
  12. Franklin Resources Inc. (BEN)
  13. Brown-Forman Corp. B (BF.B)
  14. Cardinal Health Inc. (CAH)
  15. Caterpillar Inc. (CAT)
  16. Chubb Ltd. (CB)
  17. Cincinnati Financial Corp. (CINF)
  18. Colgate-Palmolive Co. (CL)
  19. The Clorox Co. (CLX)
  20. Cintas Corp. (CTAS)
  21. Chevron Corp. (CVX)
  22. Dover Corp. (DOV)
  23. Ecolab Inc. (ECL)
  24. Consolidated Edison Inc. (ED)
  25. Emerson Electric Co. (EMR)
  26. AlbeEssex Property Trust, Inc. (ESS) – New for 2020!
  27. Expeditors International of Washington, Inc. (EXPD) – New for 2020!
  28. Federal Realty Investment Trust (FRT)
  29. General Dynamics Corp. (GD)
  30. Genuine Parts Co. (GPC)
  31. W.W. Grainger Inc. (GWW)
  32. Hormel Foods Corp. (HRL)
  33. Illinois Tool Works Inc. (ITW)
  34. Johnson & Johnson (JNJ)
  35. Kimberly-Clark Corp. (KMB)
  36. The Coca-Cola Co. (KO)
  37. Leggett & Platt Inc. (LEG)
  38. Linde PLC (LIN)
  39. Lowe’s Companies Inc. (LOW)
  40. McDonald’s Corp. (MCD)
  41. Medtronic plc (MDT)
  42. McCormick & Co. Inc. (MKC)
  43. 3M Co. (MMM)
  44. Nucor Corp. (NUE)
  45. Realty Income Corporation (O) – New for 2020!
  46. People’s United Financial Inc. (PBCT)
  47. PepsiCo Inc. (PEP)
  48. The Procter & Gamble Co. (PG)
  49. Pentair plc (PNR)
  50. PPG Industries Inc. (PPG)
  51. Roper Technologies (ROP)
  52. Ross Stores, Inc. (ROST) – New for 2020!
  53. The Sherwin-Williams Co. (SHW)
  54. S&P Global (SPGI)
  55. Stanley Black & Decker Inc. (SWK)
  56. Sysco Corp. (SYY)
  57. AT&T Inc. (T)
  58. Target Corp. (TGT)
  59. T. Rowe Price Group Inc. (TROW)
  60. United Technologies Corp. (UTX)
  61. V.F. Corp. (VFC)
  62. Walgreens Boots Alliance Inc. (WBA)
  63. Walmart Inc. (WMT)
  64. Exxon Mobil Corp. (XOM)

The S&P keeps an official list of the Dividend Aristocrats because they have a fund for it – SPDAUDP.

The best ticker award has to go to ProShares and their S&P500 Dividend Aristocrats ETF – NOBL. You can see their holdings as of 1/31/2020.

Dividend Kings

If you thought that becoming a Dividend Aristocrat was difficult, wait until you hear what it takes to be a Dividend King.

To be a Dividend King, you must have fifty years of increasing dividends. This list is naturally a subset of the Dividend Aristocrats: (as of October 2019)

  1. ABM Industries, Inc. (ABM)
  2. American States Water Co. (AWR)
  3. Commerce Bancshares, Inc. (CBSH)
  4. Cincinnati Financial Corp. (CINF)
  5. Colgate-Palmolive Co. (CL)
  6. California Water Service Group (CWT)
  7. Dover Corp. (DOV)
  8. Emerson Electric Co. (EMR)
  9. Farmers & Merchants Bancorp (FMCB)
  10. Federal Realty Investment Trust (FRT)
  11. Genuine Parts Co. (GPC)
  12. Hormel Foods Corp. (HRL)
  13. Johnson & Johnson (JNJ)
  14. The Coca-Cola Co. (KO)
  15. Lancaster Colony Corp. (LANC)
  16. Lowe’s Cos., Inc. (LOW)
  17. 3M Co. (MMM)
  18. Nordson Corp. (NDSN)
  19. Northwest Natural Holding Co. (NWN)
  20. Procter & Gamble Co. (PG)
  21. Parker-Hannifin Corp. (PH)
  22. Stepan Co. (SCL)
  23. SJW Group (SJW)
  24. Stanley Black & Decker, Inc. (SWK)
  25. Target Corp. (TGT)
  26. Tootsie Roll Industries, Inc. (TR)
  27. Altria Group, Inc. (MO)

If you look back at all the economic turmoil in the last fifty years, we’ve had several massive upheavals. You take all the chaos of the last twenty-five years and then add another twenty-five years. We now stretch into the recession of the early-1980s and the oil crisis of the late 1970s!

As an aside, one of the surprising facts about investing is that corrections are not uncommon – they happen all of the time (average is once a year).

Dividend Champions

Dividend Champions is a similar list (25 years of increased dividends) but the list is longer for two reasons:

  • Champions include companies not in the S&P 500.
  • The Aristocrats list is updated annually whereas Champions are updated monthly.

Whereas the Aristocrats are around fifty-ish companies and Kings is around twenty-ish, the Champions list is over a hundred. (140 as of this writing)

I find that the best list of Dividend Champions can be found at the DRiP Investing Resource Center.

Are They Good Investments?

Much like other named groups of companies, like Dogs of the Dow, these are good starting points but you shouldn’t just take the list and invest as is.

There have been several backdated tests of investing in dividend royalty and depending on the period, they can do better or worse than the S&P 500 as a whole.

My goal in starting my analysis with dividend royalty isn’t to beat the S&P 500. In fact, I’m not trying to beat anything. I’m trying to build a portfolio that can provide predictable cash flow so it can supplement my entrepreneurial pursuits. If you’re comparing them with the S&P 500, I think you’re playing the wrong game by using the dividend aristocrats or kings as your starting point.

If you want growth, you should be investing in companies that pay zero dividends. You want companies who have opportunities to invest their cash and not have it leave the company as dividends. By retaining those earnings and investing in projects, they create potential future growth opportunities. Dividends are great for investors who want cash but bad for the companies who want to grow. Some would say that paying dividends is a sign the company doesn’t have something better to invest in, which is a bad sign for growth.

Past Performance…

You know what they say about past performance not being indicative of future returns… companies are on the list until they’re not. It’s not uncommon for companies who have been on the list for many years to find themselves in bad situations.

So they offer a good starting point, but you should still do your due diligence to decide which companies to invest in.

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Originally posted at https://wallethacks.com/dividend-aristocrats-kings-champions/

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