Dividend Aristocrats: Definition, List & Investing Strategy

If you're interested in dividend investing, you've likely heard about the dividend aristocrats. These are a special breed of dividend paying stocks that have not only paid their dividends consistently over time, but have also increased their payouts as well.

If you're interested in dividend growth investing, these are companies that need to be on your radar.

But who are the companies? How are they selected?

Here's everything you need to know about the dividend aristocrats.

What Are The Dividend Aristocrats?

The Dividend Aristocrats are a group of S&P 500 companies that have increased their dividends consecutively for the last 25 years. The Dividend Aristocrats index was created and is maintained by the S&P Dow Jones Indices, which uses a specific methodology for determining which companies fit into the index.

The index is rebalanced each January. New companies may enter the index and others, that no longer qualify, are dropped.

To qualify, companies must also meet the following four criteria, which is specified in the above-linked methodology guide:

• Be a member of the S&P 500.
• Have increased total dividend per share amount every year for at least 25 consecutive years.
• Have a minimum float-adjusted market capitalization (FMC) of at least US$ 3 billion as of the rebalancing reference date.
• Have an average daily value traded (ADVT) of at least US$ 5 million for the three months prior to the rebalancing reference date.

Dividends must also be cash payments rather than issued in stock or as special dividends. Currently, the minimum number of stocks in the index is 40. In some cases, there may not be enough stocks that meet the annual criteria to be included in the index. When that happens, stocks that have paid dividends for 20 consecutive years are considered.

What Companies Are Included?

As of September 2021, there are 63 companies included in the index. From Wikipedia, they are:

Company	Ticker
3M Company	MMM
AbbVie Inc.	ABBV
Abbott Laboratories	ABT
AFLAC Inc.	AFL
Air Products and Chemicals Inc	APD
Albemarle Corp.	ALB
Amcor PLC	AMCR
A.O. Smith	AOS
Archer Daniels Midland	ADM
AT&T	ATT
Atmos Energy	ATO
Automatic Data Processing	ADP
Becton Dickenson	BDX
Brown-Forman	BF-B
Cardinal Health Inc.	CAH
Caterpillar Inc.	CAT
Chevron	CVX
Chubb Limited	CB
Cincinnati Financial Corp	CINF
Cintas Corp	CTAS
The Clorox Company	CLX
The Coca-Cola Company	KO
Colgate-Palmolive	CL
Consolidated Edison	ED
Dover Corp	DOV
Ecolab Inc	ECL
Emerson Electric	EMR
Essex Property Trust	ESS
Expeditors International of Washington	EXPD
Exxon Mobile Corp	XOM
Federal Realty Investment Trust	FRT
Franklin Resources	BEN
General Dynamics	GD
Genuine Parts Company	GPC
Hormel Foods Company	HRL
Illinois Tool Works	ITW
Johnson and Johnson	JNJ
Kimberly Clark	KMB
Legg and Platt	LEG
Linde PLC	LIN
Lowe's Companies	LOW
McCormick and Company	MKC
McDonald's	MCD
Medtronic	MDT
Nucor	NUE
PPG Industries	PPG
Pepsico	PEP
Pentair	PNR
People's United Financial	PBCT
Proctor & Gamble	PG
Realty Income	O
Roper Technologies	ROP
Ross Stores	ROST
S&P Global	SPGI
Sherwin-Williams	SHW
Stanley Black & Decker	SWK
Sysco	SYY
T. Rowe Price	TROW
Target Corporation	TGT
United Technologies Corp	UTX
VF Corporation	VFC
W.W. Grainger	GWW
Walmart	WMT
Walgreens Boots Alliance	WBA

How To Invest In The Dividend Aristocrats?

One of the simplest ways to invest in the Dividend Aristocrats is through a fund that mimics index, which has the ticker symbol SPDAUDP.

The index is made up of 11 sectors:

Source: https://eu.spindices.com/indices/strategy/sp-500-dividend-aristocrats

Here are several funds and ETFs that track the Dividend Aristocrat index:

• ProShares S&P 500 Dividend Aristocrats ETF (NOBL)
• iShares Selected Dividend Index (DVY)
• SPDR S&P Dividend (SDY)

An alternative approach is to simply own all companies in the index directly. That may seem challenging, but using a service like M1 Finance (which offers commission-free investing) makes it really easy. A benefit to this is that you can easily equal-weight the index, versus capitalization weight which most funds use.

You might prefer this option because equal-weighted indexes have a tendency to outperform. 

Final Thoughts

Fundamental and technical analysis both help in deciding which stocks are a good choice to invest in. If you’ve narrowed your choice down to only those in the Dividend Aristocrats index, you have less work to do when researching potential candidates.

Good companies are generally those that have positive income, growing revenues and earnings, and good management. But your research shouldn’t stop there. If researching a stock seems intimidating, going with the SPDAUDP index will ensure diversification across all of the Dividend Aristocrats stocks.