The S&P Dividend Aristocrats Index includes the S&P 500 companies that have managed to increase annual dividends for at least 25 consecutive years.
It is an elite list of quality companies that I have on my watchlist. To get there a company would have to get to become a member of S&P 500, AND also raise dividends for 25 years in a row. Only a quality company with a strong business model and the ability to grow business and generate a growing amount of excess cashflow can get a spot on this list. Success is not an accident.
There are only 64 such companies in the US today. You can see the list of these companies here.
As part of my monitoring process, I narrowed the list down to 24 dividend aristocrats for further research. I applied the following criteria:
1) I reviewed the earnings histories for each dividend aristocrat over the past decade. I removed the companies that didn't grow earnings sufficiently over the past decade. I also removed companies where earnings per share has been flatlining over the past few years. Rising earnings per share are the fuel behind future dividend increases. For REITs I looked at FFO/share.
2) I reviewed the valuation for the remaining companies and removed those that have a P/E ratio above 25. This corresponds to an earnings yield of 4%, which is roughly on par with US Treasuries.
3) The next step I took was to remove companies which had very small recent dividend increases. This included Dover, Emerson Electric, 3M, Realty Income, Stanley Black & Decker.
4) Next, I focused on companies with a payout ratio below 65%. Dividend safety is of paramount importance. I calculate an adequate margin of safety in dividends through the dividend payout ratio.
5) I focused on companies with 5 year annualized dividend growth exceeding 3%/year. This is roughly in line with historical inflation trends.
This leaves me with a list of 24 dividend aristocrats for research:
|
Name |
Ticker |
Consecutive
Annual Dividend Increases |
Forward
P/E |
Dividend
Yield |
Forward
Payout Ratio |
5
year Annualized Dividend Growth |
|
AbbVie Inc. |
ABBV |
50 |
10.85 |
3.94% |
42.75% |
17.93% |
|
Abbott Laboratories |
ABT |
50 |
20.01 |
1.81% |
36.22% |
11.60% |
|
Archer-Daniels-Midland |
ADM |
47 |
12.34 |
1.70% |
20.98% |
4.28% |
|
Aflac Incorporated |
AFL |
40 |
13.36 |
2.28% |
30.46% |
9.72% |
|
A. O. Smith Corporation |
AOS |
29 |
19.42 |
2.00% |
38.84% |
17.17% |
|
Air Products and Chemicals |
APD |
40 |
25.33 |
2.25% |
56.99% |
11.49% |
|
Atmos Energy Corporation |
ATO |
38 |
18.56 |
2.67% |
49.56% |
8.36% |
|
Brown & Brown, Inc. |
BRO |
29 |
25.21 |
0.81% |
20.42% |
8.63% |
|
Church & Dwight Co., Inc. |
CHD |
26 |
25.2 |
1.41% |
35.53% |
7.30% |
|
Cincinnati Financial Corporation |
CINF |
62 |
25.66 |
2.51% |
64.41% |
5.56% |
|
Essex Property Trust, Inc. |
ESS |
28 |
14.87 |
4.09% |
60.82% |
5.99% |
|
Expeditors International of
Washington |
EXPD |
28 |
12.51 |
1.20% |
15.01% |
7.71% |
|
General Dynamics Corporation |
GD |
31 |
19.99 |
2.07% |
41.38% |
9.47% |
|
Genuine Parts Company |
GPC |
66 |
21.82 |
2.01% |
43.86% |
4.57% |
|
W.W. Grainger, Inc. |
GWW |
51 |
20.1 |
1.17% |
23.52% |
5.76% |
|
Illinois Tool Works Inc. |
ITW |
48 |
24.22 |
2.31% |
55.95% |
15.07% |
|
Johnson & Johnson |
JNJ |
60 |
16.85 |
2.67% |
44.99% |
5.87% |
|
Lowe's Companies, Inc. |
LOW |
60 |
15.47 |
2.01% |
31.09% |
17.32% |
|
The Procter & Gamble Company |
PG |
66 |
24.28 |
2.59% |
62.89% |
4.94% |
|
Pentair plc |
PNR |
46 |
12.81 |
1.80% |
23.06% |
3.60% |
|
PPG Industries, Inc. |
PPG |
51 |
21.76 |
1.91% |
41.56% |
7.70% |
|
Sysco Corporation |
SYY |
52 |
20.35 |
2.32% |
47.21% |
8.21% |
|
Target Corporation |
TGT |
55 |
21.56 |
2.49% |
53.68% |
6.38% |
|
T. Rowe Price Group, Inc. |
TROW |
36 |
16.85 |
3.60% |
60.66% |
14.87% |
Note: Data as of 11/11/2022. Data is from sources believed to be reliable.
While the titled of the article states 24 dividend aristocrats for the next 24 years, I would not treat it as a recommendation to buy. I view it as a list of companies for further research. I encourage readers to do their own due diligence before putting money to work.
This is a sample analysis of Air Products & Chemicals (APD) for more information on how I review companies.
Relevant Articles:
- Dividend Aristocrats List for 2022
- Rising Earnings – The Source of Future Dividend Growth
- How to determine if your dividends are safe