In This Article:
- Who Are You Calling an “Aristocrat”?
- The “Royal Family” – Full 2022 List
- Reinvesting Dividends: Cash Now, Profits Forever
- One Easy Way to Play a “Royal Flush”
I firmly believe that one of the major indicators of a long-term stock pick is how long it’s been profitable enough to reward its shareholders with cash money. That’s right: checks are delivered to your door every few months.
But the best of the bunch is the “dividend aristocrats”…
Standard & Poor’s came up with the bizarre throwback name to set up certain companies.
The term “aristocrat” connotes the highest order of social class — see any hoity-toity gentleman with baron, duke, lord, or earl attached to his name. When it comes to stocks, these are royalty.
I gave a large investing speech in Toronto about dividend stocks and tossed out the term dividend aristocrats like everybody knew what I was talking about. But after the talk, a crowd of people lined up with one major question.
“What are these fabled dividend aristocrats you speak of?”
I’m happy to tell you…
Dividend aristocrats are any stocks that have raised their dividends every year for the past 25 years. In our portfolio, we have a couple that has done well enough to reward shareholders for the better part of a century.
With a track record like that, I’m very comfortable recommending them for any retirement portfolio.
Be warned: these stocks won’t make you rich overnight. But they’ll let you sleep soundly, knowing your money is growing and paying you constantly whether the stock goes up or down.
The dividend aristocrat program is designed for all types of markets — bull or bear — to help serious investors reach their goals quickly. Since 1990, the S&P 500 Dividend Aristocrats Index has outperformed the S&P 500 70.59% of the time in down months and 44.10% in up months. Those results don’t come at the expense of lower yield either – aristocrats have averaged 2.5% to the S&P 500’s 1.8%.
While there are a couple of familiar blue-chip names on the list — there are some others you might not recognize.
And building your portfolio around these stocks will help you start collecting far more income for your buck. Another perk is that you can time your payments, so you know exactly how much your checks will be, which is music to the ears of anyone looking for extra monthly income.
This list of dividend aristocrats is very diverse. It counts everything from obvious blue chips like Coca-Cola (NYSE: KO) to industrial companies like Illinois Tool Works (NYSE: ITW) to consumer staples like McCormick & Co. (NYSE: MKC).
You can see the diversification in this graph:
The only criteria aside from 25-plus years of dividend increases are that the company must be a member of the S&P 500, have a market cap of at least $3 billion, and average at least $5 million in daily share trading value for the preceding three months.
When you combine all of those attributes, it makes these 67 companies' investment royalties. We've seen three more companies added to the list this year: J.M. Smucker (NYSE: SJM), C.H. Robinson Worldwide (NASDAQ: CHRW) and Nordson Corp. (NASDAQ: NDSN).
Without further ado, the 2023 dividend aristocrats:
The Royal Family
|Company||Sector||Years of Dividend Growth|
|Dover (NYSE: DOV)||Industrials||67|
|Genuine Parts (NYSE: GPC)||Consumer discretionary||67|
|Procter & Gamble (NYSE: PG)||Consumer staples||67|
|Emerson Electric (NYSE: EMR)||Industrials||66|
|3M (NYSE: MMM)||Industrials||65|
|Cincinnati Financial (NASDAQ: CINF)||Financials||62|
|Coca-Cola (NYSE: KO)||Consumer staples||61|
|Johnson & Johnson (NYSE: JNJ)||Healthcare||61|
|Colgate-Palmolive (NYSE: CL)||Consumer staples||60|
|Illinois Tool Works (NYSE: ITW)||Industrials||59|
|Hormel Foods (NYSE: HRL)||Consumer staples||57|
|Stanley Black & Decker (NYSE: SWK)||Industrials||55|
|Federal Realty Investment Trust (NYSE: FRT)||Real estate||55|
|Sysco (NYSE: SYY)||Consumer staples||54|
|W.W. Grainger (NYSE: GWW)||Industrials||52|
|Becton, Dickinson & Co. (NYSE: BDX)||Healthcare||51|
|PPG Industries (NYSE: PPG)||Materials||51|
|Target (NYSE: TGT)||Consumer discretionary||51|
|AbbVie (NYSE: ABBV)||Healthcare||51|
|Abbott Laboratories (NYSE: ABT)||Healthcare||51|
|Kimberly Clark (NYSE: KMB)||Consumer staples||51|
|PepsiCo (NASDAQ: PEP)||Consumer staples||51|
|Nucor (NYSE: NUE)||Materials||50|
|S&P Global (NYSE: SPGI)||Financials||50|
|Archer-Daniels-Midland (NYSE: ADM)||Consumer staples||50|
|Walmart (NYSE: WMT)||Consumer staples||50|
|VF Corp. (NYSE: VFC)||Consumer discretionary||49|
|Consolidated Edison (NYSE: ED)||Utilities||48|
|Lowe's (NYSE: LOW)||Consumer discretionary||48|
|Automatic Data Processing (NASDAQ: ADP)||Information technology||48|
|Walgreens Boots Alliance (NASDAQ: WBA)||Consumer staples||47|
|Pentair (NYSE: PNR)||Industrials||47|
|McDonald's (NYSE: MCD)||Consumer discretionary||46|
|Medtronic (NYSE: MDT)||Healthcare||46|
|Sherwin-Williams (NYSE: SHW)||Materials||45|
|Franklin Resources (NYSE: BEN)||Financials||41|
|Air Products & Chemicals (NYSE: APD)||Materials||41|
|Aflac (NYSE: AFL)||Financials||40|
|Amcor PLC (NYSE: AMCR)||Materials||40|
|ExxonMobil (NYSE: XOM)||Energy||40|
|Brown-Forman (B Shares) (NYSE: BF.B)||Consumer staples||39|
|Cintas (NASDAQ: CTAS)||Industrials||39|
|Atmos Energy Corporation (NYSE: ATO)||Utilities||39|
|McCormick & Co. (NYSE: MKC)||Consumer staples||37|
|T. Rowe Price Group (NASDAQ: TROW)||Financials||37|
|Cardinal Health (NYSE: CAH)||Healthcare||37|
|Clorox (NYSE: CLX)||Consumer staples||36|
|Chevron (NYSE: CVX)||Energy||36|
|Ecolab (NYSE: ECL)||Materials||31|
|A.O. Smith (NYSE: AOS)||Industrials||31|
|West Pharmaceutical Services, Inc. (NYSE: WST)||Healthcare||30|
|Linde (NYSE: LIN)||Materials||30|
|Roper Technologies (NYSE: ROP)||Industrials||30|
|Caterpillar (NYSE: CAT)||Industrials||30|
|Chubb (NYSE: CB)||Financials||30|
|Expeditors International of Washington, Inc. (NASDAQ: EXPD)||Industrials||30|
|Albemarle Corp. (NYSE: ALB)||Materials||29|
|Essex Property Trust, Inc. (NYSE: ESS)||Real estate||29|
|Realty Income Corporation (NYSE: O)||Real estate||29|
|International Business Machines (NYSE: IBM)||Information technology||29|
|NextEra Energy Inc. (NYSE: NEE)||Utilities||29|
|Brown & Brown (NYSE: BRO)||Financials||29|
|Church & Dwight (NYSE: CHD)||Consumer Staples||27|
|Enbridge (NYSE: ENB)||Energy||27|
|General Dynamics (NYSE: GD)||Industrials||26|
|J.M. Smucker (NYSE: SJM)||Consumer Staples||25|
|C.H. Robinson Worldwide (NASDAQ: CHRW)||Transportation||25|
|Nordson (NASDAQ: NDSN)||Industrials||*59|
Now, you could basically throw a dart at this list and have a long-term holding that you can set and forget for years to come. Companies of this royal stature have shown the ability to keep their crown through good times and bad. But which ones should you consider adding to your portfolio?
Cash Now, Profits Forever
That depends on your goals. Do you want a high-yield dividend where you can collect income checks every few months?
IBM (NYSE: IBM) sports a juicy 5% dividend. Walgreen Boots Alliance (NYSE: WBA) is a shade under at 4.89%. V.F. Corp (NYSE: VFC) – is a lifestyle apparel company that boasts North Face, Timberland, and Vans among its holdings. It currently yields 4.86%.
They all offer great returns right now.
But what if you’re playing the long game, where you can select a few solid anchors and reinvest those dividends back into the stock? It supercharges your returns over the long haul.
The secret to this approach is in the compounding effect that Albert Einstein once called “the most powerful force on earth.”
He was referring to compound interest.
This compounding effect arises when the dividend yield is added to the principal so that from that moment on, the interest begins to earn interest. It’s a self-fulfilling prophecy. The more dividends reinvested into the stock buys you more stock, which pays even more dividends, which buys you even more stock.
It’s a beautiful thing; over time, that process can add up to a small fortune — even with very modest investments. If you’re working with dividend aristocrats, you can target companies with more modest dividends, knowing that they will steadily increase them over the years. I like investing long-term in companies I use, like McCormick and Company (NYSE: MKC). The company sells spices, seasoning mixes, condiments, and other popular flavor products to the entire food industry. I’m sure you have some of their spices in your cabinet right now.
McCormick rakes in over $6 billion in annual sales across 170 countries and territories. Its dividend yields a modest 1.66%. If you had invested in McCormick 20 years ago, you’d be sitting on an 878.15% gain. However, if you had reinvested those dividends, you’d have realized a 1,167.97% gain.
For a $10,000 investment, that’s a difference between about $97,000 and $127,000. That is why it’s crucial to reinvest those dividends with solid dividend aristocrat stocks.
It may be overwhelming to decide which of these 65 companies to choose when starting a full-on dividend aristocrat portfolio. But fear not, there is an easy way to gain exposure to the entire kingdom…
One Easy Way to Play a “Royal Flush”
Enter the ProShares S&P 500 Aristocrats ETF (BATS: NOBL).
This ETF provides exposure to 50 companies that raised dividend payments annually for at least 25 years by tracking the S&P 500 Dividend Aristocrats. The index contains a minimum of 40 stocks, which are pretty equally weighted.
It's returned over 60% in the last five years alone, not including dividends. It historically boasts a dividend yield of around 2%.
Consumer defensives and industrials are the top two sector holdings, accounting for one-fifth of the portfolio each, while health care, financials, and basic materials round off the next three spots. The fund has $7.3 billion in assets and an expense ratio of 0.35%.
It maintains a high volume of holds but also regulates each stock. No one can account for more than 30% of the index weight, diversifying it and preventing monopolization.
Its top ten holdings include dividend stalwarts like Nucor Steel (NYSE: NUE), Target (NYSE: TGT), and T. Rowe Price (NYSE: TROW).
NOBL is the simplest way to get broad exposure to dividend aristocrat stocks.
So grab a seat on your favorite throne, pop in that monocle, and sit back while the dividend aristocrats build your kingdom for you.
The Profit Sector
Note: This list is updated at least once per year or as otherwise needed to keep it accurate. The date listed on the page above indicates when it was last updated. Bookmark this page to save it as an easy reference guide.