Dividend aristocrats are defined as companies within the S&P 500 index, that have paid consistent dividends for 25 years & increased their payout.
In other words, the organizations are reliable & frequent in their dividend payouts throughout decades.
Why go for dividend aristocrats?
If you are considering medium to long term dividend investing, choosing dividend aristocrats is a relatively safe choice. You see, these companies are giants that have been around for generations & for the most part, prove consistent revenue (growth).
What companies fall under dividend aristocrats?
Examples include the below 6 companies, but extend much further:
- The Walt Disney Company
- The Coca-Cola Company
- Johnson & Johnson
- Procter & Gamble
Aristocrats & investment strategy
Before you decide on this type of investing, consider your short & long term goals. If you desire to be wealthy quickly & have a high-risk tolerance then dividends might not be for you to begin with.
If you have a medium risk tolerance, there are many companies on the exchange offering dividends, that are not as large as these aristocrats. The difference is usually a higher dividend yield, with the associated risk the company can’t, or won’t, pay.
Comparing S&P 500 return vs all aristocrats
The below image exemplifies the difference between the S&P500 index value over time, and the same value plotted for dividend aristocrats. As these companies tend the be much larger & established, a drop in the market does not impact them as much. On the other hand, an increase does get amplified.