S&P 500 Dividend Aristocrats
It includes companies that belong to this index but has also increased their dividend payouts
Updated:
September 15, 2022Deciding which companies to invest your hard-earned money in can be difficult. There are plenty of factors to consider like growth or value, small-cap or large-cap, dividend or no dividend.
The S&P 500, or the Standard and Poor's 500, is a stock market index that tracks the performance of the 500 largest publicly traded companies in the United States.
The S&P 500 Dividend Aristocrats include companies that belong to this index but have also increased their dividend payouts for over 25 consecutive years.
The S&P 500 Dividend Aristocrats have many companies that have been increasing their dividends for over 40 consecutive years. However, some companies have been removed from the exclusive index for not raising their dividend payout.
This index was created in 2005 and had some companies that have been in the index for the entire duration of its existence.
As of April 2022, there are 64 companies on the index right now. The index has a floor of 40 companies. In order to diversify the index, there is a 30% limit on any single sector.
The Dividend Aristocrats are an exclusive index because they are companies that not only maintain their dividend but increase it every year. This is a sign that a company has sound financials and is consistently making a profit.
Additionally, the index is rebalanced every fiscal quarter in January, April, July, and October. This rebalancing is to ensure that no company has too much weighting in the index. Once a year, companies are removed and added to the Dividend Aristocrats.
The appeal of this index is that it is well-diversified, has lower volatility, and pays out dividends.
The ability to own a small portion of each company in the index is more feasible through the ProShares S&P 500 Dividend Aristocrats ETF (NOBL). This exchange-traded fund (ETF) has over $10 billion in net assets.
Understanding the S&P 500 Dividend Aristocrats
These companies are generally considered more value stocks, but the diversification of the index provides some growth as well. The consistent dividend payout often appeals to income investors and long-term investors.
Eligibility Criteria
There are strict criteria that a company must have to be considered a dividend aristocrat.
Companies are rarely removed from the index. Generally, a company is removed because they were either bought or a recession caused the company to cut dividends. For example, in the past 22 years, 34 companies have been removed from the index.
The criteria to be in the index are:
Member of the S&P 500 index
Maintain a minimum float-adjusted market cap of $3 billion (float-adjusted means that the index only counts shares of the companies that are open for investors to buy, which excludes shares owned by the company, other companies, and the government)
Increase dividend payments for 25 consecutive years
Maintain $5 million in daily share trade value for three months before acceptance
Advantages
♦ Aristocrats have lower volatility in comparison to broader stock markets because this specific index limits the percent of total holdings one sector can take up.
♦ Additionally, stability also ensures the quality of the top & bottom lines, management, and corporate governance.
♦ The aristocrats are rooted in their constant growth of dividends, so this index is a reliable source of income or additional units.
♦ This index tends to deliver higher yields along with consistency. You will receive consistent dividend income that is, on average higher than you would from a standard S&P 500 index.
Disadvantages
♦ While preventing a sector or company from dominating the fund, it also eliminates the potential to capitalize on significant capital gains from a specific company or sector. If a company does well, it will be rebalanced at the end of the fiscal quarter.
There are primarily two ways an individual can invest in the Aristocrats.
The first method is to invest in the individual companies that belong to the index. These stocks are income-generating companies that have a dependable dividend payout. These stocks can provide some stability to an individual's stock portfolio.
The second method is to invest in the ProShares S&P 500 Dividend Aristocrats ETF, which is rebalanced every quarter to ensure that the index is diversified. Another popular ETF that directly follows the index is SPDR S&P Global Dividend ETF (WDIV).
Both of these methods can be pursued through a brokerage firm.
S&P 500 dividend aristocrats companies
There are 64 companies in this index as of April 2022.
Here are the ten companies that have the longest streak of consecutive years of increasing dividends:
| Company Name | Consecutive Years |
|---|---|
| Dover | 66 |
| Genuine Parts | 65 |
| Procter & Gamble | 65 |
| Emerson Electric | 65 |
| 3M | 63 |
| Coca-Cola | 59 |
| Colgate-Palmolive | 59 |
| Johnson & Johnson | 59 |
| Hormel Foods | 56 |
| Stanley Black & Decker | 54 |
Here are the top 10 holdings in the ProShares S&P 500 Dividend Aristocrats ETF (NOBL):
| Company Name | % of Total Portfolio |
|---|---|
| Albemarle Corp. | 2.09% |
| Amcor PLC | 1.82% |
| Exxon Mobil Corp. | 1.82% |
| Sherwin-Williams Co. | 1.76% |
| Expeditors International of Washington Inc. | 1.76% |
| Chevron Corp. | 1.75% |
| Linde PLC | 1.69% |
| Consolidated Edison Inc. | 1.66% |
| Franklin Resources Inc. | 1.65% |
| Chubb Ltd. | 1.65% |
Here are the 9 sector allocations in the ProShares S&P 500 Dividend Aristocrats ETF (NOBL):
| Sector Name | % of Total Portfolio |
|---|---|
| Industrials | 23.90% |
| Consumer Goods | 19.93% |
| Financials | 15.09% |
| Health Care | 10.72% |
| Basic Materials | 9.78% |
| Consumer Services | 8.70% |
| Utilities | 4.89% |
| Oil and Gas | 3.57% |
| Technology | 3.19% |
You can find the whole list of companies in this index here.
The Dividend Kings are also a popular index among investors.
The Dividend Kings are public companies that have increased their dividends for 50 consecutive years, whereas the Aristocrats have increased their dividends for at least 25 years.
As of June 2022, there are 44 Dividend Kings. Some of these companies are
♦ Lowe's Companies
♦ Target Corporation
♦ Colgate-Palmolive Company
♦ Coca-Cola Company
♦ PepsiCo
♦ Procter & Gamble
♦ AbbVie
♦ Johnson & Johnson
♦ 3M Company
♦ Stanley & Decker
Timeline of Dividend Aristocrats Index
2008
♦ The index was created with 52 companies.
2009
♦ 9 companies were removed:
► Anheuser Busch
► Bank of America
► Comerica
► Fifth Third Bank
► Keycorp
►Progressive Corp
► Regions Financial
► Synovus Financial
► Wrigley Company (acquired by Mars, Incorporated)
♦ 2 companies were added:
► Bemis Company
► Leggett & Platt
2010
♦ 10 companies were removed:
► Avery Dennison
► BB&T
► Gannett
► General Electric
► Johnson Controls
► Legg Mason
► M&T Bank
► Pfizer
► State Street Bank
► U.S. Bancorp
♦ 1 company was added:
► Brown Forman
2011
♦ 3 companies were added:
► Ecolab
► Hormel Foods
► McCormick & Company
2012
♦ 1 company was removed:
► CenturyLink
♦ 9 companies were added:
► AT&T
► Colgate-Palmolive
► Franklin Templeton Investments
► Genuine Parts Company
► Health Care Property Investors
► Illinois Tool Works
► Medtronic
► Sysco
► T. Rowe Price
2013
♦ 1 company was removed:
► Pitney Bowes
2014
♦ 1 company was removed:
► Bemis (removed from S&P 500 index)
2015
♦ 2 companies were removed:
► Family Dollar Stores (acquired by Dollar Tree)
► Sigma-Aldrich (acquired by Merck Group)
2016
♦ 1 company was removed:
► Chubb Corp (acquired by ACE Limited)
2019
♦ 4 companies were added:
► Chubb Limited
► People's United Financial
► Caterpillar Inc.
► United Technologies
2020
♦ 7 companies were added:
► Amcor
► Atmos Energy
► Realty Income Corporation
► Essex Property Trust
► Ross Stores
► Albemarle Corporation
► Expeditors International
♦ 2 companies were removed:
► Ross Stores
► Helmerich & Payne
2021
♦ 6 companies were removed:
► Raytheon
► Carrier Global
► Otis Worldwide
► Church and Dwight
► Stryker Corporation
► Leggett & Platt (removed from S&P 500)
♦ 3 companies were added:
► IBM
► NextEra Energy
► West Pharmaceutical Services
2022
♦ 1 company was removed:
► AT&T
♦ 2 companies were added:
► Brown & Brown, Inc.
► Church & Dwight Co., Inc.
FAQs
The index is reweighted four times a year, and companies are removed/added once a year in January.
Companies are often removed because they didn't raise their dividend or were forced to cut them as a result of difficult economic conditions.
Additionally, companies can be removed if they are acquired by another company, or are removed from the S&P 500 Index.
For example, in 2020, Ross Stores was forced to suspend its dividend as a result of the COVID-19 pandemic. Consumer spending at stores decreased during the height of the pandemic, and Ross Stores took a significant revenue hit and couldn't maintain their dividend.
Another example is in 2009 and 2010, 19 companies lost their aristocratic status during the recession in the United States. Half of these companies were banks or financial institutions.
The constant updating of the index is required to maintain the coveted reputation of the dividend aristocrats.
Historically, this index has proven to be a valuable investment, but it also depends on your intentions with investing.
This index is a good investment if you're looking for a reliable source of dividend income and want to invest in industry leaders who have reliable cash flow and lower volatility than the broader market.
The Dividend Aristocrats Index has increased its dividend payout five times faster than the S&P 500 Index since 2014 and the inception of the ProShares S&P 500 Dividend Aristocrats ETF.
However, if you're looking for growth, you may want to research other stocks and ETFs.
It's important to take into account your short and long-term goals for your portfolio. These specific companies that belong to this index can provide a constant stream of income because they reliably increase their dividend more than any other companies.
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