Dividend aristocrats explained

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
  • IBM
  • AT&T
  • 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.

Dividend aristocrats returns