This is a guest contribution by Bob Ciura of Sure Dividend.
With interest rates on the decline, income investors are once again put in a difficult position. Lower rates have caused yields across the spectrum of stocks and fixed income to fall. While investors have enjoyed the strong returns of the S&P 500 over the past several years, the average stock in the index now yields less than 2%.
As a result, investors who rely on stocks for income have to search harder for high yields. Fortunately, there are still many high-dividend stocks that provide much stronger levels of income than the S&P 500. The following 3 stocks each have dividend yields above 5%, and we believe their dividends are secure.
High-Yield Stock #1: AT&T Inc. (T)
AT&T is a telecommunications giant, with a market capitalization of $285 billion. It offers a wide range of telecom services such as Internet, video and wireless. It also owns the DirecTV satellite television business. AT&T has long been known as a reliable dividend growth stock. It has raised its dividend for 36 consecutive years. Plus, the stock currently has a high dividend yield of 5.4%.
Telecom stocks are typically considered slow-growth companies. 2019 was another year of steady results. Adjusted earnings-per-share increased 4% growth in the third quarter, and by slightly less than 1% over the first three quarters.
While AT&T certainly generates consistent cash flow, it also has a major growth catalyst in the form of its Time Warner acquisition. By acquiring Time Warner, AT&T now owns multiple popular media properties including HBO and CNN. It also owns the Warner Bros. studio. The deal presents strategic benefits for AT&T.
As a content distributor, AT&T was at risk of “cord-cutting”, in which people cancel their high-priced cable bundles in favor of cheaper streaming options. This poses a significant risk for AT&T’s legacy cable and DirecTV businesses. However, now that AT&T owns content, it has a valuable hedge against the risk of cord-cutting. It can also offer unique packages with its strong content lineup, to further reduce customer churn.
AT&T expects approximately 10% growth in adjusted EPS per year, through 2022 at the midpoint of management guidance. Revenue is expected to increase 1% to 2% each year, while cost synergies are likely to fuel margin expansion. AT&T expects free cash flow of $30 billion to $32 billion by 2022, which will allow the company to pay down debt from the Time Warner acquisition, and pay dividends to shareholders.
AT&T currently has an annualized dividend payout of $2.08 per share. With expected adjusted EPS of $3.65 for 2019, AT&T has a dividend payout ratio of 57%. The dividend payout is highly secure, with room for continued dividend increases.
High-Yield Stock #2: AbbVie Inc. (ABBV)
Our next top high-yield stock is AbbVie, a pharmaceutical company that was spun off from Abbott Laboratories in 2013. AbbVie was separated from its parent company so that it could focus on its own strategic initiatives, with its own dedicated management team. The results speak for themselves—from 2013 to 2018, AbbVie grew revenue and adjusted earnings-per-share by 12% and 20% each year, respectively.
AbbVie is facing some uncertainty regarding its future growth, as its flagship drug Humira will lose patent exclusivity in the U.S. in 2023. Humira is the company’s largest product by far, comprising more than half the company’s revenue in 2019. But this exposes AbbVie to patent risk, as the negative impact from biosimilar competition is significant. Humira has already lost patent exclusivity in Europe, which caused international Humira sales to fall by 29% over the first three quarters of 2019.
Fortunately, AbbVie has prepared for this outcome by investing heavily in its own pipeline. AbbVie spent over $5 billion in research and development in 2017 and 2018, to develop its own portfolio of next-generation products. This spending is paying off, as the company has a number of strong products in its pipeline. For example, Imbruvica sales increased by 30% through the first three quarters of the year. Venclexta sales more than doubled in the same time.
Overall, AbbVie’s adjusted earnings-per-share increased 12% over the first three quarters of 2019. This growth bodes well for the future. In addition, AbbVie’s growth will be accelerated by the $63 billion acquisition of Allergan (AGN), whose therapeutic areas include medical aesthetics, eye care, central nervous system, and gastroenterology. Allergan’s key product is Botox.
The acquisition diversifies AbbVie’s portfolio by adding exposure to cosmetic products. Post-acquisition, AbbVie expects to generate annual revenue of nearly $50 billion. The company also expects the acquisition to boost its adjusted EPS by 10% in the first year.
Thanks to the contributions of AbbVie’s organic investments, as well as the Allergan acquisition, we are confident the company will be able to continue growing. In the meantime, AbbVie stock pays a current dividend yield of 5.5%. And, AbbVie is a Dividend Aristocrat, dating back to its days as a subsidiary of Abbott.
High-Yield Stock #3: Exxon Mobil (XOM)
Our last high-yield stock pick is yet another Dividend Aristocrat, oil and gas giant Exxon Mobil. Exxon Mobil is the largest U.S. energy company, with a market capitalization of $280 billion. Exxon Mobil has a high dividend yield of 5.2%, and the company has increased its dividend for 37 consecutive years. This is a highly impressive history of dividend growth, particularly since Exxon Mobil operates in a cyclical industry.
Exxon Mobil is an integrated major, meaning it operates across the full spectrum of the oil and gas industry. It operates an upstream exploration and production segment, a downstream refining unit, midstream transportation assets, and a chemicals business.
Exxon Mobil, alongside the broader energy sector, has struggled against weak oil prices in recent years. West Texas Intermediate crude oil currently trades at $56 per barrel, while Brent crude, the international equivalent, trades at $62 per barrel. This has put a dent in profitability across Big Oil companies. Last quarter, Exxon Mobil’s net income declined by 49% from the same quarter the previous year.
Still, Exxon Mobil has a positive long-term future. Aside from increasing commodity prices, Exxon Mobil will grow earnings from a number of new projects coming online. According to a recent company presentation, 550 billion barrels of new oil supply is required through 2040 just to meet the anticipated demand around the world. Exxon Mobil is ramping up multiple large projects globally, in the U.S. as well as major sites in Guyana, Brazil, and more. The company forecasts earnings to grow by more than $4 billion in 2020, even with flat commodity prices. If oil prices average just $40 per barrel, Exxon Mobil still expects to grow its earnings by approximately 40% from 2017-2025.
Exxon Mobil has a long history of navigating the ups and downs of the oil and gas industry. It has raised its dividend for over 30 years in a row, and the stock currently yields 5.2%. This makes Exxon Mobil an attractive Dividend Aristocrat for income investors.
Relevant Articles:
- AT&T: A High Yield Telecom for Current Income
- Dividend Aristocrats List for 2020
- Are Energy Stock Values Today a Once in a Lifetime Opportunity?
- The Energy Company I want to buy
Thursday, January 30, 2020
Monday, January 27, 2020
Three Dividend Growth Stocks For Further Research
As part of my monitoring process, I review the list of dividend increases every single week. This exercise helps me to monitor the organic dividend growth for my portfolio, and ensure that I am on track to meet my long term objectives of ensuring that my dividend income increases purchasing power over time.
This exercise also helps me to identify hidden dividend gems for further research. It is helpful to review the list of dividend increases, go through press releases, check my files and make updates from there. I try to narrow the list down to focus on companies that have managed to increase distributions for at least ten years in a row. I then further narrow the list down as I go through each company's fundamentals, valuation and determine which companies show promise for further research.
That's how I came up with a list of these three companies for further research. While the first two are a little pricey today, I like their fundamentals. I would not hesitate to add at the right price.
The third company seems fairly valued today, though that doesn't mean it won't be cheaper a few months from now.
The companies for further research include:
Kimberly-Clark Corporation (KMB), together with its subsidiaries, manufactures and markets personal care, consumer tissue, and professional products worldwide. It operates through three segments: Personal Care, Consumer Tissue, and K-C Professional.
The company’s board of directors approved a 3.90% increase it the quarterly dividend to $1.07/share. This marked the 48th consecutive annual dividend increase for this dividend champion. The rate of dividend growth has been slowing down, compared to the ten year annualized growth of 6.20%.
Between 2008 and 2019, earnings per share went from $4.04 to $6.24
Kimberly-Clark is expected to earn between $5.95/share to $6.65/share in 2020.
The stock is not cheap at 23 times earnings. Kimberly-Clark offers a dependable yield of 3% today. It may not be a bad company to look at on dips to $120 - $132/share and even lower. Check my analysis of Kimberly-Clark for more information about the company,
Air Products and Chemicals, Inc. (APD) provides atmospheric gases, process and specialty gases, equipment, and services worldwide.
The company raised its quarterly dividend by 15.50% to $1.34/share. This was the 38th consecutive annual dividend increase for this dividend champion.
Over the past decade, Air Products & Chemicals has managed to grow distributions at an annualized rate of 9.60%.
Between 2008 and 2019, Air Products & Chemicals has managed to grow earnings from $4.15/share to $7.94/share. The company expects to earn between $9.35 to $9.60/share in 2020.
The stock is overvalued at 26.10 times forward earnings and yields 2.20%. The stock may be a better value on dips below $190/share.
Comcast Corporation (CMCSA) operates as a media and technology company worldwide. It operates through Cable Communications, Cable Networks, Broadcast Television, Filmed Entertainment, Theme Parks, and Sky segments.
The company raised its quarterly dividend by 9.50% to 23 cents/share. This marked the 12th consecutive annual dividend increase for this dividend achiever. Comcast has managed to grow distributions at an annualized rate of 22.70%/year over the past decade.
Between 2008 and 2019, Comcast managed to grow earnings from 43 cents/share to $3.13/share. Analysts are expecting earnings per share to hit $3.28 in 2020.
The stock is attractively valued at 13.60 times forward earnings and yields 2.06%.
Relevant Articles:
- Seven Notable Dividend Increases From Last Week
- Kimberly-Clark (KMB) Dividend Stock Analysis
- What is intrinsic value?
- Seven Companies Working Hard For Their Stockholders
This exercise also helps me to identify hidden dividend gems for further research. It is helpful to review the list of dividend increases, go through press releases, check my files and make updates from there. I try to narrow the list down to focus on companies that have managed to increase distributions for at least ten years in a row. I then further narrow the list down as I go through each company's fundamentals, valuation and determine which companies show promise for further research.
That's how I came up with a list of these three companies for further research. While the first two are a little pricey today, I like their fundamentals. I would not hesitate to add at the right price.
The third company seems fairly valued today, though that doesn't mean it won't be cheaper a few months from now.
The companies for further research include:
Kimberly-Clark Corporation (KMB), together with its subsidiaries, manufactures and markets personal care, consumer tissue, and professional products worldwide. It operates through three segments: Personal Care, Consumer Tissue, and K-C Professional.
The company’s board of directors approved a 3.90% increase it the quarterly dividend to $1.07/share. This marked the 48th consecutive annual dividend increase for this dividend champion. The rate of dividend growth has been slowing down, compared to the ten year annualized growth of 6.20%.
Between 2008 and 2019, earnings per share went from $4.04 to $6.24
Kimberly-Clark is expected to earn between $5.95/share to $6.65/share in 2020.
The stock is not cheap at 23 times earnings. Kimberly-Clark offers a dependable yield of 3% today. It may not be a bad company to look at on dips to $120 - $132/share and even lower. Check my analysis of Kimberly-Clark for more information about the company,
Air Products and Chemicals, Inc. (APD) provides atmospheric gases, process and specialty gases, equipment, and services worldwide.
The company raised its quarterly dividend by 15.50% to $1.34/share. This was the 38th consecutive annual dividend increase for this dividend champion.
Over the past decade, Air Products & Chemicals has managed to grow distributions at an annualized rate of 9.60%.
Between 2008 and 2019, Air Products & Chemicals has managed to grow earnings from $4.15/share to $7.94/share. The company expects to earn between $9.35 to $9.60/share in 2020.
The stock is overvalued at 26.10 times forward earnings and yields 2.20%. The stock may be a better value on dips below $190/share.
Comcast Corporation (CMCSA) operates as a media and technology company worldwide. It operates through Cable Communications, Cable Networks, Broadcast Television, Filmed Entertainment, Theme Parks, and Sky segments.
The company raised its quarterly dividend by 9.50% to 23 cents/share. This marked the 12th consecutive annual dividend increase for this dividend achiever. Comcast has managed to grow distributions at an annualized rate of 22.70%/year over the past decade.
Between 2008 and 2019, Comcast managed to grow earnings from 43 cents/share to $3.13/share. Analysts are expecting earnings per share to hit $3.28 in 2020.
The stock is attractively valued at 13.60 times forward earnings and yields 2.06%.
Relevant Articles:
- Seven Notable Dividend Increases From Last Week
- Kimberly-Clark (KMB) Dividend Stock Analysis
- What is intrinsic value?
- Seven Companies Working Hard For Their Stockholders
Saturday, January 25, 2020
Dividend Aristocrats List for 2020
The S&P Dividend Aristocrats index tracks companies in the S&P 500 that have increased dividends every year for at least 25 years in a row. The index is equally weighted, and rebalanced every quarter.
To qualify for membership in the S&P 500 Dividend Aristocrats index, a stock must satisfy the following criteria:
1. Be a member of the S&P 500
2. Have increased dividends every year for at least 25 consecutive years
3. Meet minimum float-adjusted market capitalization and liquidity requirements defined in the index inclusion and index exclusion rules below.
The group of companies in the Dividend Aristocrats index tend to generate reliable dividend income, and provide the potential for strong total returns. The list is well diversified across sectors.
There are 64 companies in the Dividend Aristocrats index for 2020, up from 57 in 2019. The seven new additions include:
Albermarle Corp (ALB)
Amcor PLC (AMCR)
Atmos Energy Corp (ATO)
Essex Property Trust (ESS)
Expeditors International (EXPD)
Realty Income Corp (O)
Ross Stores (ROST)
The odd addition is Amcor, since that's the company that acquired the old Bemis (BMS). Bemis had a 36 year history of annual dividend increases, yet oddly it was not a part of the Dividend Aristocrats Index. Bemis was dropped from the index in 2014, because it was dropped from S&P 500. However, the company had kept raising dividends before and after 2014. Shareholders who held directly woudl have likely continued owning it.
I am not sure why Atmos Energy (ATO) is just now being added to the index, since the company has a 36 year history of annual dividend increases.
There were no companies removed from the list in 2019. The number of dividend aristocrats is equal to the record number of Dividend Aristocrats from 2001.Since the inception of the index in 1989, the number of holdings has fluctuated from 26 to 64 holdings. It is still not even half the number of Dividend Champions however.
The 2020 Dividend Aristocrats are listed below:
The index has generated strong total returns over time past decade. I wanted to note that in 2008, the Dividend Aristocrats index declined by 21.88%. The S&P 500 however declined by 37%.
The dividend aristocrats index tends to shine during bear markets and low return environments. However, it also pulls its weight when we are in a bull market too. It is the best of both worlds really.
These are the returns since the launch of the Dividend Aristocrats Index in 1989:
I first stumbled upon the Dividend Aristocrats index in late 2007, and instantly understood why dividend growth investing is such a powerful wealth generating tool. If someone had invested in the Dividend Aristocrats index after reading my review of the list at the beginning of 2008, they would have tripled their money. An investment in the dividend aristocrats a decade ago, would have resulted in a total return of 350%. In other words, investing $100 in the Dividend Aristocrats list in January 2010 would have turned into $394.45. The same amount investing in S&P 500 would have turned into $364.15
As I gained more experience however, I have gravitated more towards the Dividend Champions list, which was created by Dave Fish. The Dividend Champions list is more complete, as it doesn’t exclude companies due to low liquidity, or due to market capitalization below a certain threshold. In addition, I find that historically, the list of Dividend Champions has followed a more consistent approach than the list of Dividend Aristocrats. Sadly, Dave passed away last year. Luckily, another person has agreed to update it for the time being. You can view the 2020 Dividend Champions List here.
When I review the list of historical changes in the Dividend Aristocrats index, I see some inconsistencies in the way portfolio components are added or removed.
For example, the Dividend Aristocrats index removed Altria in 2007, after it spun-off Kraft Foods and as a result its dividend decreased. It could be argued that the dividend income for the investor was not decreased, because they kept getting a dividend from Altria as well as dividends from Kraft Foods.
The S&P committee seems to have rectified this issue, and have kept both Abbott and Abbvie after legacy Abbott Laboratories split in two companies in early 2013.
Ironically, Dave Fish had Altria listed as a Dividend Champion. However, he didn’t have Abbott nor Abbvie listed as a dividend champion ( they are listed as Dividend Aristocrats however).
Last year, I found out that Cardinal Health (CAH) has only been able to grow dividends for 23 years in a row. This is why it is not on the dividend champions list. The dividend aristocrats list however has a 31 year streak of annual dividend increases listed.
This is why you need to perform your own checks as an investor.
In addition, I wanted to let you know that I would not purchase all companies from either lists blindly. I run my entry criteria screen to come up with a list of companies for further research. Before investing in any individual stock, I research it enough to gain some understanding of the business and its trends in fundamentals.
Relevant Articles:
- Dividend Champions, Contenders & Challengers: The most complete list of US dividend growth stocks available
- Dividend Aristocrats List for 2017
- Dividend Aristocrats for Dividend Growth and Total Returns
- Where are the original Dividend Aristocrats now?
- Historical changes of the S&P Dividend Aristocrats
- Why do I like the Dividend Aristocrats?
- Dividend Aristocrats List for 2016
To qualify for membership in the S&P 500 Dividend Aristocrats index, a stock must satisfy the following criteria:
1. Be a member of the S&P 500
2. Have increased dividends every year for at least 25 consecutive years
3. Meet minimum float-adjusted market capitalization and liquidity requirements defined in the index inclusion and index exclusion rules below.
The group of companies in the Dividend Aristocrats index tend to generate reliable dividend income, and provide the potential for strong total returns. The list is well diversified across sectors.
There are 64 companies in the Dividend Aristocrats index for 2020, up from 57 in 2019. The seven new additions include:
Albermarle Corp (ALB)
Amcor PLC (AMCR)
Atmos Energy Corp (ATO)
Essex Property Trust (ESS)
Expeditors International (EXPD)
Realty Income Corp (O)
Ross Stores (ROST)
The odd addition is Amcor, since that's the company that acquired the old Bemis (BMS). Bemis had a 36 year history of annual dividend increases, yet oddly it was not a part of the Dividend Aristocrats Index. Bemis was dropped from the index in 2014, because it was dropped from S&P 500. However, the company had kept raising dividends before and after 2014. Shareholders who held directly woudl have likely continued owning it.
I am not sure why Atmos Energy (ATO) is just now being added to the index, since the company has a 36 year history of annual dividend increases.
There were no companies removed from the list in 2019. The number of dividend aristocrats is equal to the record number of Dividend Aristocrats from 2001.Since the inception of the index in 1989, the number of holdings has fluctuated from 26 to 64 holdings. It is still not even half the number of Dividend Champions however.
The 2020 Dividend Aristocrats are listed below:
Symbol
|
Name
|
Sector
|
Years of Annual Dividend Increases
|
10 year Dividend Growth
|
Dividend Yield
|
ABBV
|
AbbVie Inc.
|
Health Care
|
47
|
13.99%
|
5.65%
|
ABT
|
Abbott Laboratories**
|
Health Care
|
47
|
5.51%
|
1.59%
|
ADM
|
Archer-Daniels-Midland Co
|
Consumer Staples
|
44
|
9.60%
|
3.16%
|
ADP
|
Automatic Data Processing
|
Information Technology
|
45
|
10.61%
|
2.05%
|
AFL
|
AFLAC Inc
|
Financials
|
37
|
6.79%
|
2.06%
|
ALB
|
Albemarle Corp.
|
Materials
|
25
|
11.14%
|
1.81%
|
AMCR
|
Amcor
|
Materials
|
25
|
3.50%
|
2.29%
|
AOS
|
Smith A.O. Corp
|
Industrials
|
26
|
21.50%
|
2.11%
|
APD
|
Air Products & Chemicals Inc
|
Materials
|
38
|
9.85%
|
2.20%
|
ATO
|
Atmos Energy
|
Utilities
|
36
|
4.96%
|
1.96%
|
BDX
|
Becton Dickinson & Co
|
Health Care
|
48
|
8.91%
|
1.14%
|
BEN
|
Franklin Resources Inc
|
Financials
|
40
|
14.02%
|
4.28%
|
BF.B
|
Brown-Forman Corp B
|
Consumer Staples
|
36
|
8.03%
|
0.98%
|
CAH
|
Cardinal Health Inc
|
Health Care
|
24
|
17.52%
|
3.57%
|
CAT
|
Caterpillar Inc
|
Industrials
|
26
|
8.45%
|
2.93%
|
CB
|
Chubb Ltd
|
Financials
|
26
|
9.92%
|
1.97%
|
CINF
|
Cincinnati Financial Corp
|
Financials
|
59
|
3.51%
|
2.11%
|
CL
|
Colgate-Palmolive Co
|
Consumer Staples
|
56
|
7.11%
|
2.45%
|
CLX
|
Clorox Co
|
Consumer Staples
|
42
|
7.72%
|
2.68%
|
CTAS
|
Cintas Corp
|
Industrials
|
37
|
18.43%
|
0.90%
|
CVX
|
PBCT
|
Energy
|
33
|
5.99%
|
3.81%
|
DOV
|
Dover Corp
|
Industrials
|
64
|
8.58%
|
1.67%
|
ECL
|
Ecolab Inc
|
Materials
|
28
|
12.63%
|
0.95%
|
ED
|
Consolidated Edison Inc
|
Utilities
|
46
|
2.29%
|
3.27%
|
EMR
|
Emerson Electric Co
|
Industrials
|
63
|
4.05%
|
2.61%
|
ESS
|
Essex Property Trust
|
Real Estate
|
25
|
6.49%
|
2.52%
|
EXPD
|
Expeditors International
|
Industrials
|
25
|
10.89%
|
1.35%
|
FRT
|
Federal Realty Invt Trust
|
Real Estate
|
52
|
4.65%
|
3.24%
|
GD
|
General Dynamics
|
Industrials
|
28
|
10.35%
|
2.20%
|
GPC
|
Genuine Parts Co
|
Consumer Discretionary
|
63
|
6.58%
|
3.11%
|
GWW
|
Grainger W.W. Inc
|
Industrials
|
48
|
12.30%
|
1.75%
|
HRL
|
Hormel Foods Corp
|
Consumer Staples
|
54
|
16.03%
|
1.97%
|
ITW
|
Illinois Tool Works Inc
|
Industrials
|
45
|
12.62%
|
2.43%
|
JNJ
|
Johnson & Johnson
|
Health Care
|
57
|
6.87%
|
2.56%
|
KMB
|
Kimberly-Clark
|
Consumer Staples
|
48
|
6.01%
|
2.98%
|
KO
|
Coca-Cola Co
|
Consumer Staples
|
57
|
6.91%
|
2.77%
|
LEG
|
Leggett & Platt
|
Consumer Discretionary
|
48
|
4.44%
|
3.14%
|
LIN
|
Linde plc
|
Materials
|
26
|
8.14%
|
1.67%
|
LOW
|
Lowe's Cos Inc
|
Consumer Discretionary
|
57
|
19.39%
|
1.83%
|
MCD
|
McDonald's Corp
|
Consumer Discretionary
|
44
|
8.72%
|
2.37%
|
MDT
|
Medtronic plc
|
Health Care
|
42
|
10.23%
|
1.81%
|
MKC
|
McCormick & Co
|
Consumer Staples
|
34
|
9.04%
|
1.44%
|
MMM
|
3M Co
|
Industrials
|
61
|
10.94%
|
3.23%
|
NUE
|
Nucor Corp
|
Materials
|
47
|
1.27%
|
3.20%
|
O
|
Realty Income Corp.
|
Real Estate
|
25
|
4.68%
|
3.62%
|
PBCT
|
People's United Financial
|
Financials
|
27
|
1.54%
|
4.48%
|
PEP
|
PepsiCo Inc
|
Consumer Staples
|
47
|
7.96%
|
2.67%
|
PG
|
Procter & Gamble
|
Consumer Staples
|
63
|
5.56%
|
2.38%
|
PNR
|
Pentair PLC
|
Industrials
|
44
|
0.54%
|
1.65%
|
PPG
|
PPG Industries Inc
|
Materials
|
48
|
6.40%
|
1.62%
|
ROP
|
Roper Technologies, Inc
|
Industrials
|
27
|
18.81%
|
0.54%
|
ROST
|
Ross Stores Inc.
|
Consumer Discretionary
|
25
|
24.95%
|
0.88%
|
SHW
|
Sherwin-Williams Co
|
Materials
|
41
|
12.28%
|
0.76%
|
SPGI
|
S&P Global
|
Financials
|
46
|
9.74%
|
0.77%
|
SWK
|
Stanley Black & Decker
|
Industrials
|
52
|
7.58%
|
1.66%
|
SYY
|
Sysco Corp
|
Consumer Staples
|
50
|
4.97%
|
2.18%
|
T
|
AT&T Inc
|
Communication Services
|
36
|
2.21%
|
5.40%
|
TGT
|
Target Corp
|
Consumer Discretionary
|
52
|
14.35%
|
2.31%
|
TROW
|
T Rowe Price Group Inc
|
Financials
|
33
|
11.76%
|
2.32%
|
UTX
|
United Technologies
|
Industrials
|
26
|
6.68%
|
1.92%
|
VFC
|
VF Corp
|
Consumer Discretionary
|
47
|
12.36%
|
2.27%
|
WBA
|
Walgreens Boots Alliance Inc
|
Consumer Staples
|
44
|
13.63%
|
3.52%
|
WMT
|
Wal-Mart
|
Consumer Staples
|
46
|
7.18%
|
1.85%
|
XOM
|
Exxon Mobil Corp
|
Energy
|
37
|
7.53%
|
5.25%
|
The index has generated strong total returns over time past decade. I wanted to note that in 2008, the Dividend Aristocrats index declined by 21.88%. The S&P 500 however declined by 37%.
The dividend aristocrats index tends to shine during bear markets and low return environments. However, it also pulls its weight when we are in a bull market too. It is the best of both worlds really.
These are the returns since the launch of the Dividend Aristocrats Index in 1989:
Year
|
Dividend Aristocrats
|
S&P 500
|
Relative Performance
|
1990
|
5.70%
|
-3.10%
|
8.80%
|
1991
|
38.50%
|
30.50%
|
8.00%
|
1992
|
10.10%
|
7.60%
|
2.50%
|
1993
|
4.30%
|
10.10%
|
-5.80%
|
1994
|
0.90%
|
1.40%
|
-0.50%
|
1995
|
34.60%
|
37.60%
|
-3.00%
|
1996
|
20.90%
|
23.00%
|
-2.10%
|
1997
|
35.50%
|
33.40%
|
2.10%
|
1998
|
16.80%
|
28.60%
|
-11.80%
|
1999
|
-5.40%
|
21.00%
|
-26.40%
|
2000
|
10.10%
|
-9.10%
|
19.20%
|
2001
|
10.80%
|
-11.90%
|
22.70%
|
2002
|
-9.90%
|
-22.10%
|
12.20%
|
2003
|
25.40%
|
28.70%
|
-3.30%
|
2004
|
15.50%
|
10.90%
|
4.60%
|
2005
|
3.70%
|
4.90%
|
-1.20%
|
2006
|
17.30%
|
15.80%
|
1.50%
|
2007
|
-2.10%
|
5.50%
|
-7.60%
|
2008
|
-21.90%
|
-37.00%
|
15.10%
|
2009
|
26.60%
|
26.50%
|
0.10%
|
2010
|
19.35%
|
15.06%
|
4.29%
|
2011
|
8.33%
|
2.11%
|
6.22%
|
2012
|
16.94%
|
16.00%
|
0.94%
|
2013
|
32.27%
|
32.39%
|
-0.12%
|
2014
|
15.76%
|
13.69%
|
2.07%
|
2015
|
0.93%
|
1.38%
|
-0.45%
|
2016
|
11.83%
|
11.96%
|
-0.13%
|
2017
|
21.73%
|
21.83%
|
-0.10%
|
2018
|
-2.73%
|
-4.38%
|
1.65%
|
2019
|
27.97%
|
31.49%
|
-3.52%
|
You can see the performance of the Dividend Aristocrats Index versus S&P 500 since 1989. The S&P 500 dominated during the 1990's. However, the Dividend Aristocrats index did very well during the next decade. During the past decade, the Dividend Aristocrats Index has done better as well.
As I gained more experience however, I have gravitated more towards the Dividend Champions list, which was created by Dave Fish. The Dividend Champions list is more complete, as it doesn’t exclude companies due to low liquidity, or due to market capitalization below a certain threshold. In addition, I find that historically, the list of Dividend Champions has followed a more consistent approach than the list of Dividend Aristocrats. Sadly, Dave passed away last year. Luckily, another person has agreed to update it for the time being. You can view the 2020 Dividend Champions List here.
When I review the list of historical changes in the Dividend Aristocrats index, I see some inconsistencies in the way portfolio components are added or removed.
For example, the Dividend Aristocrats index removed Altria in 2007, after it spun-off Kraft Foods and as a result its dividend decreased. It could be argued that the dividend income for the investor was not decreased, because they kept getting a dividend from Altria as well as dividends from Kraft Foods.
The S&P committee seems to have rectified this issue, and have kept both Abbott and Abbvie after legacy Abbott Laboratories split in two companies in early 2013.
Ironically, Dave Fish had Altria listed as a Dividend Champion. However, he didn’t have Abbott nor Abbvie listed as a dividend champion ( they are listed as Dividend Aristocrats however).
Last year, I found out that Cardinal Health (CAH) has only been able to grow dividends for 23 years in a row. This is why it is not on the dividend champions list. The dividend aristocrats list however has a 31 year streak of annual dividend increases listed.
This is why you need to perform your own checks as an investor.
In addition, I wanted to let you know that I would not purchase all companies from either lists blindly. I run my entry criteria screen to come up with a list of companies for further research. Before investing in any individual stock, I research it enough to gain some understanding of the business and its trends in fundamentals.
Relevant Articles:
- Dividend Champions, Contenders & Challengers: The most complete list of US dividend growth stocks available
- Dividend Aristocrats List for 2017
- Dividend Aristocrats for Dividend Growth and Total Returns
- Where are the original Dividend Aristocrats now?
- Historical changes of the S&P Dividend Aristocrats
- Why do I like the Dividend Aristocrats?
- Dividend Aristocrats List for 2016