Before the painful fourth-quarter stock market decline, steady dividend payers probably weren’t foremost in many investors’ minds.
After all, the Federal Reserve was raising interest rates and the massive cut in federal corporate income taxes was setting up even better earnings and sales comparisons than usual. But the current lower valuations (and higher yields) for “Dividend Aristocrats,” as well as their better short-term and long-term performance, might inspire you to take a second look.
We’ll list the highest yielding Dividend Aristocrats, as well as those most favored by analysts, after defining the groups and showing their performance against broad indexes for various periods.
S&P Dow Jones Indices maintains the S&P 500 Dividend Aristocrats Index
which is made up of the 53 companies in the S&P 500 Index
that have raised their regular dividends on common shares for at least 25 consecutive years. It makes do difference how high a Dividend Aristocrat’s current dividend yield is. The idea is that a commitment among corporate management teams to increasing their payout to investors each year can lead to better performance over the long haul.
One easy way to invest in the Dividend Aristocrats as a group is the ProShares S&P 500 Dividend Aristocrats ETF
The ETF holds all 53 Dividend Aristocrats and has an annual expense ratio of 0.35%, with a five-star rating (the highest) from Morningstar.
The S&P High-Yield Dividend Aristocrats Index
includes the 111 companies in the S&P 1500 Composite Index that have increased their regular dividend payouts for at least 20 straight years. (The S&P 1500 Composite Index is made up of the S&P 500, the S&P 400 Mid-Cap Index
and the S&P 600 Small-Cap Index
Therefore, all S&P 500 Dividend Aristocrats are also high-yield Dividend Aristocrats.)
The SPDR S&P Dividend ETF
holds all of the high-yield Dividend Aristocrats. It also has annual expenses of 0.35% and a five-star rating from Morningstar.
Here’s how the S&P 500 Dividend Aristocrats Index and the S&P High-Yield Dividend Aristocrats Index performed during the fourth quarter against the Dow Jones Industrial Average
the full S&P 500 and the S&P Composite 1500 Index, with dividends reinvested:
The Dividend Aristocrats held up best during the broad decline. But they brought up the rear during the first three quarters of 2018:
For the full year, the Aristocrats were the best performers:
It may surprise you that the Aristocrats also beat the broad indexes for five years, through the end of 2018:
For 10 years, through 2018, results were mixed, with the S&P 500 Dividend Aristocrats Index in the lead, while the S&P High-Yield Dividends Aristocrats Index was in fourth place:
But this is a time to take 10-year returns with a grain of salt. We’re approaching the March 2009 post-crisis low for the market, so 10-year returns can be deceptive. Here’s how the indexes performed during 2008:
The first chart (for the fourth quarter of 2018) and the 2008 chart show that you might sleep a little easier with the Aristocrats during broad declines.
Finally, here’s a 15-year chart:
The S&P 500 Dividend Aristocrats ran away with the best 15-year performance, but the High-Yield Dividend Aristocrats had a respectable second-place performance through 2018.
Highest-yielding Dividend Aristocrats
Getting back to the Aristocrat groups, we’ll look at the high-yield Aristocrats, because the larger group includes all the S&P 500 Dividend Aristocrats, and because a 20-year record of annual dividend increases is rather impressive.
Here are the 25 highest-yielding stocks among the S&P High-Yield Dividend Aristocrats:
|Company||Ticker||Dividend yield||Total return – 2019 through Jan. 7||Total return – 2018||Total return – 5 years through Jan. 7||Also an S&P 500 Dividend Aristocrat?|
|Tanger Factory Outlet Centers Inc.||6.60%||5%||-19%||-20%|
|International Business Machines Corp.||5.32%||4%||-23%||-26%||Yes|
|Mercury General Corp.||4.97%||-2%||2%||31%|
|People’s United Financial Inc.||4.64%||5%||-20%||23%|
|Exxon Mobil Corp.||4.59%||5%||-15%||-16%||Yes|
|Realty Income Corp.||4.26%||-1%||16%||105%|
|National Retail Properties Inc.||4.20%||-2%||18%||90%|
|United Bankshares Inc.||4.17%||5%||-7%||27%|
|Cardinal Health Inc.||4.16%||3%||-25%||-24%||Yes|
|Leggett & Platt Inc.||4.09%||4%||-22%||42%||Yes|
|Eaton Vance Corp.||3.88%||3%||-36%||-2%|
|Old Republic International Corp.||3.80%||0%||5%||55%|
|Consolidated Edison Inc.||3.79%||-1%||-7%||69%||Yes|
|J.M. Smucker Co.||3.50%||4%||-23%||8%|
|Franklin Resources Inc.||3.42%||3%||-23%||-36%||Yes|
|Federal Realty Investment Trust||3.42%||1%||-8%||32%||Yes|
|MDU Resources Group Inc.||3.38%||1%||-9%||-7%|
You can click on the tickers for more about each company, including news, profiles, price ratios, financials and analysts’ ratings, estimates and price targets.
This first list is of obvious interest to income-seeking investors — after all, 10-year U.S. Treasury notes
yield about 2.70% and the iShares Core U.S. Aggregate Bond Index, which is designed to track the performance of the Bloomberg Barclays U.S. Aggregate Bond index, has an average yield to maturity of 3.27%, according to FactSet.
Having a relatively high yield can indicate that some (or many) investors are no longer confident the company can continue to increase its dividend. Shares of AT&T
were down 22% during 2018 (including reinvested dividends), while Tanger Factor Outlets Centers
— which, like AT&T, yields 6.60% — was down 19%. Both stocks have recovered a bit so far this month.
Best performers among the Dividend Aristocrats
Here’s a list of the 25 high-yield Dividend Aristocrats with the highest five-year total returns:
|Company||Ticker||Total return – 5 years through Jan. 7||Total return – 2019 through Jan. 7||Total return – 2018||Dividend yield||Also an S&P 500 Dividend Aristocrat?|
|Ross Stores Inc.||153%||7%||5%||1.01%|
|American States Water Co.||151%||-6%||18%||1.74%|
|S&P Global Inc.||137%||2%||1%||1.15%||Yes|
|NextEra Energy Inc.||134%||-1%||14%||2.58%|
|Atmos Energy Corp.||129%||-2%||10%||2.31%|
|Lancaster Colony Corp.||128%||-3%||39%||1.51%|
|California Water Service Group||125%||-6%||7%||1.67%|
|New Jersey Resources Corp.||124%||-3%||17%||2.65%|
|McCormick & Co.||120%||-1%||39%||1.65%||Yes|
|Church & Dwight Co.||117%||0%||33%||1.32%|
|Becton, Dickinson and Co.||113%||-3%||7%||1.41%||Yes|
|MSA Safety Inc.||109%||1%||24%||1.60%|
|West Pharmaceutical Services Inc.||108%||1%||0%||0.61%|
|Automatic Data Processing Inc.||107%||0%||14%||2.42%||Yes|
|Realty Income Corp.||105%||-1%||16%||4.26%|
|Hormel Foods Corp.||104%||-1%||20%||1.99%||Yes|
|Roper Technologies Inc.||101%||1%||4%||0.69%||Yes|
Those are excellent five-year returns, when compared to a 54% total return for the S&P 500 and a 52% increase for the S&P Composite 1500, through Jan. 7.
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