S&P 500 Dividend Aristocrats
The Dividend Aristocrats are S&P 500 index constituents that have increased their dividend payouts for 25 consecutive years or more.
The S&P 500 Dividend Aristocrat index was launched by Standard and Poors in May 2005, and has historically outperformed the S&P 500 index with lower volatility over longer investment time frames. For example, over the past 10 years through the period ending September 30, 2019, the S&P 500 Dividend Aristocrat index has returned 14.67% on an average annual basis whereas the S&P 500 index has returned 13.24% annually during that same period. The risk factor commonly called the standard deviation of the S&P 500 during this same 10 year period was 12.55% while the Dividend Aristocrats' was 11.28% (10.12% lower). Standard deviation measures investment risk as a range, in percentage terms, within a selected probability called in statistical terms a confidence level. The investment return falls within a range centered around the mean return, typically within a bell-shaped curve. The higher the standard deviation or the wider the range, the greater the risk, since the investment's return has the potential to be farther away from the projected mean return.
The S&P 500 Dividend Aristocrats' long-term track record showcases the effect of compounding dividends as well as the positive effect of a rising dividend payout on a portfolio's total return over multi-year periods. As of the ten-year period ending December 31, 2018 the NASDAQ index, which is an index of primarily high market-beta technology and healthcare stocks, is the only major index to have outperformed the S&P 500 Dividend Aristocrat index at 16.76% vs. 14.63% on an average annual basis; however, it does so with far greater risk in that the NASDAQ has a market beta of 1.16 vs. the S&P 500 index of 1.0 vs. the S&P 500 Dividend Aristocrat index of .87. That is, the NASDAQ achieves its investment returns with 25% more risk than the S&P 500 Dividend Aristocrats.
Risk and reward can be compared using "risk-adjusted returns". Investment managers and rating services such as Morningstar use risk-adjusted returns as a leading criterion for rating mutual funds and ETF's. A risk-adjusted comparison allows for equal comparisons by taking the risk of an investment into consideration. The risk-adjusted total return equals the total investment return divided by the market beta of that index. On this metric, the calculation for the NASDAQ index would be 16.76 / 1.16, a 14.45% risk-adjusted 10-year average annual total return. The S&P 500 Dividend Aristocrats risk-adjusted annual return over the same time period would be 14.63 / .87, or 16.82%. This "apples to apples" comparison shows the S&P 500 Dividend Aristocrat index beats the NASDAQ by 2.37% annually, or is 16.2% better.
The Dividend Aristocrats companies span all eleven sectors within the S&P 500 index and therefore include both large-cap growth and large-cap value companies. This composition contrasts with most other dividend-yield based indices, which tend to be more value-oriented in their holdings and are more heavily weighted toward financial, energy, and utility stocks. The S&P 500 Dividend Aristocrat index has traditionally had a large-cap value-investor audience that favored blue-chip dividend stocks. However, many large-cap growth investors also now view the S&P 500 Dividend Aristocrat index constructively as they seek companies that possess a combination of both capital appreciation and a consistent and increasing dividend payout. The increased popularity of "Dividend Growth" investing in recent years has elevated the public profile of the S&P 500 Dividend Aristocrat index.
Dividend Growth investing involves investing in companies that are generating robust free cash flow. Free cash flow is defined as a company's operating cash flow minus capital expenditures. The significance of strong free cash flow is that it then allows a companies' management the flexibility to pay a higher dividend growth rate. Since 1990, the average or mean annual dividend growth rate for the S&P 500 index has been 6.07% through September 30, 2019. The absolute percentage level of dividends in a dividend growth strategy is less paramount, as there are many attractive dividend growth stocks that yield only a 1% to 2% annual dividend rate. What the investor is seeking in this type of strategy is a higher and accelerating rate of an annual percentage of the dividend increase. Most dividend growth investors seek dividend payouts that increase at a 10% or more rate annually. S&P Capital IQ rates these large-cap individual companies based on the growth and stability of their earnings and dividends. In rating the company, a quality letter scale of A-plus to D is utilized. What is considered "high quality" on this scale are those companies that are rated A-plus, A, A-minus and B-plus. The typical dividend growth stock is rated B-plus or higher, for the reason that a company has to be generating a significant amount of free cash flow in order to pay an increasing dividend annually. These dividend growth companies therefore tend to be more mature companies and do not include many of today's widely held newer companies such as the “FAANG” stocks.
To be eligible for the S&P 500 Dividend Aristocrat index, a stock must have increased their dividend payouts for a minimum of 25 consecutive years, must currently be part of the S&P 500 index, and must have a minimum market capitalization of $3 billion. A committee at S&P Global makes the final decision on which companies are included in the S&P 500 index. Should a company reduce their dividend or be dropped from the S&P 500 index, the stock is automatically dropped from the Dividend Aristocrat list as well. The S&P 500 Dividend Aristocrat index has historically consisted of approximately 50 large-cap companies with most of the stocks in this index rating B-plus or higher on the quality scale. What stands out immediately upon review of the Dividend Aristocrat index is that, unlike the S&P 500 index, there is a relatively small amount of technology holdings (1.7% vs. 21.9% as of September 30, 2019).
Since the 2008 financial crisis, the S&P 500 Dividend Aristocrat list has evolved as follows:
2009 - The list declined from 52 companies in 2008 to 43 companies in 2009, as nine companies cut their dividend payouts due to the 2008 financial crisis. They were: Anheuser Busch (BUD), Bank of America (BAC) , Comerica (CMA), Fifth Third Bank (FITB), Keycorp (KEY), Progressive Corp (PGR), Regions Financial (RF), Synovus Financial (SNV), and Wm. Wrigley (WW), which was acquired by Mars.
2010 - A second round of ten companies were dropped: Avery Dennison (AVY), BB&T , Gannett (GCI), General Electric (GE), Johnson Controls (JCI), Legg Mason (LM), M&T Bank (MTB), Pfizer (PFE), State Street Bank (STT), and US Bancorp (USB).
Also in 2010, Brown Forman (BF.B) was added.
2012 - CenturyLink (CTL) was removed from the index after reducing its dividend from 72.5 to 54 cents per share per quarter.
In addition in 2012, nine new companies were added to the index as follows:
- AT&T (T)
- Colgate-Palmolive (CL)
- Franklin Resources (BEN)
- Genuine Parts (GPC)
- Health Care Property Investors (HCP)
- Illinois Tool Works (ITW)
- Medtronic (MDT)
- Sysco (SYY)
- T. Rowe Price (TROW)
2013 - Pitney Bowes (PBI) was removed after slashing the dividend from 37.5c to 18.75c per quarter per share.
2014 - Bemis (BMS) was removed from the S&P 500 index and therefore dropped from the S&P 500 Dividend Aristocrat list.
2017- General Dynamics (GD) and the REIT Federal Realty Investment Trust (FRT) were added to the list and the REIT HCP, Inc. was removed from the index due to spinning off HCR Manor Care and reducing their dividend.
2018- Praxair (PX), A.O. Smith (AOS) and Roper Technologies (ROP) were added to the list. Praxair was subsequently replaced by Linde plc (LIN), which was created by the merger of Linde AG and Praxair.
S&P 500 Dividend Aristocrat companies as of April 12, 2019
|Ticker Symbol||Company||GICS Economic Sector||GICS Sub-Industry||SEC Filings|
|MMM||3M Company||Industrials||Industrial Conglomerates||reports|
|ABBV||AbbVie Inc.||Health Care||Biotechnology||reports|
|ABT||Abbott Laboratories||Health Care||Health Care Equipment & Supplies||reports|
|APD||Air Products & Chemicals Inc||Materials||Chemicals||reports|
|AOS||A.O. Smith||Industrials||Building Products||reports|
|ADM||Archer-Daniels-Midland Co||Consumer Staples||Food Products||reports|
|T||AT&T||Communication Services||Diversified Telecommunication Services||reports|
|ADP||Automatic Data Processing||Information Technology||IT Services||reports|
|BDX||Becton Dickinson||Health Care||Health Care Equipment & Supplies||reports|
|BF.B||Brown-Forman (Class B shares)||Consumer Staples||Beverages||reports|
|CAH||Cardinal Health Inc.||Health Care||Health Care Providers & Services||reports|
|CVX||Chevron Corp.||Energy||Oil, Gas & Consumable Fuels||reports|
|CINF||Cincinnati Financial Corp||Financials||Insurance||reports|
|CTAS||Cintas Corp||Industrials||Commercial Services & Supplies||reports|
|CLX||The Clorox Company||Consumer Staples||Household Products||reports|
|KO||Coca-Cola Co||Consumer Staples||Beverages||reports|
|CL||Colgate-Palmolive||Consumer Staples||Household Products||reports|
|ED||Consolidated Edison Inc||Utilities||Multi-Utilities||reports|
|EMR||Emerson Electric||Industrials||Electrical Equipment||reports|
|XOM||Exxon Mobil Corp||Energy||Oil, Gas & Consumable Fuels||reports|
|FRT||Federal Realty Investment Trust||Real Estate||Equity REITs||reports|
|BEN||Franklin Resources||Financials||Capital Markets||reports|
|GD||General Dynamics||Industrials||Aerospace & Defense||reports|
|GPC||Genuine Parts Company||Consumer Discretionary||Distributors||reports|
|HRL||Hormel Foods Corp||Consumer Staples||Food Products||reports|
|ITW||Illinois Tool Works||Industrials||Machinery||reports|
|JNJ||Johnson & Johnson||Health Care||Pharmaceuticals||reports|
|KMB||Kimberly-Clark||Consumer Staples||Household Products||reports|
|LEG||Leggett & Platt||Consumer Discretionary||Household Durables||reports|
|LOW||Lowe's Companies, Inc.||Consumer Discretionary||Specialty Retail||reports|
|MKC||McCormick & Company||Consumer Staples||Food Products||reports|
|MCD||McDonald's||Consumer Discretionary||Hotels, Restaurants & Leisure||reports|
|MDT||Medtronic||Health Care||Health Care Equipment & Supplies||reports|
|NUE||Nucor||Materials||Metals & Mining||reports|
|PBCT||People's United Financial||Financials||Banks||reports|
|PG||Procter & Gamble||Consumer Staples||Household Products||reports|
|ROP||Roper Technologies||Industrials||Industrial Conglomerates||reports|
|SPGI||S&P Global (formerly McGraw Hill Financial, Inc.)||Financials||Capital Markets||reports|
|SWK||Stanley Black & Decker Inc.||Industrials||Machinery||reports|
|SYY||Sysco||Consumer Staples||Food & Staples Retailing||reports|
|TROW||T. Rowe Price||Financials||Capital Markets||reports|
|TGT||Target Corporation||Consumer Discretionary||Multiline Retail||reports|
|UTX||United Technologies Corporation||Industrials||Aerospace & Defense||reports|
|VFC||VF Corporation||Consumer Discretionary||Textiles, Apparel & Luxury Goods||reports|
|GWW||W. W. Grainger||Industrials||Trading Companies & Distributors||reports|
|WMT||Walmart||Consumer Staples||Food & Staples Retailing||reports|
|WBA||Walgreens Boots Alliance||Consumer Staples||Food & Staples Retailing||reports|
S&P 500 Dividend Aristocrat Sector Weightings as of September 30, 2019
- Consumer Staples - 23%,
- Industrials - 22%,
- Financials - 12%,
- Consumer Discretionary - 11%,
- Health Care - 11%,
- Materials - 10%,
- Energy - 3%,
- Technology - 2%,
- Real Estate - 2%,
- Utilities - 2%,
- Telecommunications- 2%
The ProShares S&P 500 Dividend Aristocrats ETF (NOBL) has tracked the S&P 500 Dividend Aristocrats Index since 2013.
By taking a Targeted Outcome approach, Cboe (Chicago Board Options Exchange) launched an index called Cboe S&P 500 Dividend Aristocrats Target Income Index (Ticker: SPAI). This index is designed with the primary goal of generating an annualized level of income that is approximately 3.5% over the annual dividend yield of the S&P 500 Index and a secondary goal of generating price returns that are proportional to the price appreciation of the Index. The SPAI Index investment strategy includes (1) buying the stocks contained in the S&P 500 Dividend Aristocrat Index, and (2) partially "writing" (or selling) weekly "covered" call options on each stock, generally on the last trading day of each week.
Additionally, Cboe launched another index called Cboe S&P 500 Dividend Aristocrats Target Income Index - Monthly Series (Ticker: SPATI). This index differs from the weekly series in that this index is designed with the primary goal of generating an annualized level of income that is approximately 3% over the annual dividend yield of the S&P 500 Index by partially "writing" (or selling) monthly "covered" call options on each stock, generally on the third Friday of each month.
Cboe Vest, a subsidiary of Cboe, is an asset management firm that has released a mutual fund (Ticker: KNGIX) (Sep 11, 2017) that seeks to track the 'SPAI' index, as well as an ETF (Ticker: KNG) (Mar 27, 2018) that seeks to track the 'SPATI' index.
Other popular ETFs that mimic the S&P 500 Dividend Aristocrat index but do not replicate it exactly include the exchange-traded fund (ETF) SPDR S&P Dividend (SDY) which tracks the S&P High Yield Dividend Aristocrats Index. The S&P High Yield Dividend Aristocrat Index is a different index than the S&P 500 Dividend Aristocrat Index. The High Yield version tracks the S&P Composite 1500 index, which contains three times as many stocks than the S&P 500 index. Another difference is that the High Yield version contains stocks that have increased their dividends for at least 20 consecutive years while the more popular and widely held Dividend Aristocrat Index has stocks that have increased their dividends for at least 25 consecutive years.
One other well-known ETF that mimics but does not exactly track the S&P 500 Dividend Aristocrat Index is the iShares Select Dividend (DVY). This ETF tracks the Dow Jones U.S. Select Dividend Index.
- "Constituent Change Announced for the S&P 500 Dividend Aristocrats Index" (PDF). Spice-indices.com. Retrieved 24 November 2018.
- "Constituent Change Announced for the S&P High Yield Dividend Aristocrats Index" (PDF). Spice-indices.com. Retrieved 24 November 2018.
- "Dividend Aristocrats 2014 - MoneyInvestExpert.com". Moneyinvestexpert.com. 20 December 2013.
- "ProShares S&P 500 Dividend Aristocrats ETF - NOBL - Daily Holdings - ProShares ETFs". Proshares.com.
- "Cboe S&P 500 Dividend Aristocrats Target Income Index". Cboe.com.
- "Cboe S&P 500 Dividend Aristocrats Target Income Index - Monthly Series". Cboe.com.
- "Dividend Aristocrats ETF - Find Out Which S&P 500 Dividend Aristocrat is Best". Smartdividendstocks.com.
- Dividend Aristocrats List for 2018 Current list of all Dividend Aristocrats including statistics on each of the stocks that include dividend yield, valuation, debt metrics, and averages. Each stock is a U.S. S&P 500 stock that has increased its dividend for at least 25 consecutive years. This is the complete list of Dividend Aristocrat stocks.
- US Dividend Champions List An excel spreadsheet prepared by David Fish. The list provides an abundance of stock information for companies that have increased their dividend for consecutive years in a row. The list is broken into three categories separated by the dividend streak length: Dividend Champions (>24 years), Contenders (10 to 24 years) and Challengers (5 to 9 years).
- Canadian Dividend All-Star List The Canadian Dividend All-Star List is a list of Canadian companies that have increased their dividend for five or more calendar years in a row. The excel spreadsheet which can be downloaded for free provides a variety of stock and dividend information. Beyond regular stock information like the price, dividend yield, or P/E the list provides more than 10 years worth of dividend payments for each company and the lowest price each year for the past decade.
- Dividend Aristocrats 2015