Investing in dividend aristocrats can be a rewarding and profitable strategy for investors looking to reap the rewards of a consistent and growing dividend income. These stocks represent the best of the best in terms of dividend payouts and are often considered to be the most reliable and consistent stocks for dividend investors.
What are Dividend Aristocrats?
Dividend aristocrats are stocks that have consistently increased their dividend for 25 consecutive years or more. These stocks usually represent well-established companies that have a long history of success and are seen as reliable investments. The S&P 500 Dividend Aristocrats index is currently comprised of 60+ stocks that meet this criteria and are seen as the cream of the crop in terms of dividend investing. Dividend aristocrat stocks are categorized into champions, contenders, and challengers and have certain benefits for investors.
Dividend Aristocrat Champions
Champion stocks have consistently increased their dividend payouts for at least 25 years. These stocks have a long history of reliable and consistent dividend increases. They typically have strong balance sheets, are highly profitable, and pay out a generous dividend yield. These stocks are usually blue-chip stocks that are well-known and widely held by investors. Examples include Johnson & Johnson, Procter & Gamble, and PepsiCo.
Dividend Aristocrat Contenders
Contender stocks have increased their dividend payouts for at least 15 years but less than 25 years. These stocks typically have a strong track record of dividend increases, but they’re not as established or well-known as champion stocks. While these stocks may not have the same history of dividend increases as champion dividend stocks, they can still be a reliable source of dividend income. Examples include Target Corporation, Wal-Mart, and Chevron Corporation.
Dividend Aristocrat Challengers
Challenger stocks have consistently increased their dividend payouts for at least 10 years but less than 15 years. Despite a shorter track record of dividend increases than champion and contender dividend aristocrats, they can be a reliable source of dividend income. Examples include Apple, Microsoft, and Oracle.
Benefits of Dividend Aristocrat Investing
Dividend aristocrat investing offers several benefits to investors:
- Reliability: Dividend aristocrats are reliable investments, given their long history of success and have been able to withstand the test of time.
- Steady Income: Dividend aristocrats provide a steady stream of income, as they have a record of consistently paying and increasing their dividends. Note: Dividends are not ironclad, so there is still some risk of dividend cuts.
- Capital Appreciation: Dividend aristocrats are usually large companies with a track record of success, providing investors with potential capital appreciation.
In conclusion, dividend aristocrats can be a profitable and reliable way to generate a consistent dividend income. Investors can choose from champions, contenders, and challengers, depending on their risk tolerance and investment objectives. As with any investment, always do your research and due diligence. In short, investing in dividend aristocrat stocks can be a great way to generate a reliable and growing income stream.
John is a freelance B2B writer, investor, and blogger. A large part of his writing experience has been as a writer/designer in the training department of a large regional retailer based in Portland, Oregon. He currently resides in the other Vancouver (in Washington state) with his wife and two pet dwarf rabbits.