Challenging times have forced many companies to suspend or decrease their dividends. And even some that managed to maintain their payout levels have nonetheless fallen from the ranks of an elite group of dividend-payers.

The past year or two has shrunk the numbers of the Dividend Aristocrats, Standard & Poor's list of companies that have increased their dividends each year for at least 25 years. According to the rules, if you go even a single year without raising your dividend, you get booted from the Aristocrats.

That's exactly what happened to these companies:

  • Avery Dennison
  • BB&T (NYSE:BBT)
  • Gannett (NYSE:GCI)
  • General Electric (NYSE:GE)
  • Johnson Controls
  • Legg Mason
  • M&T Bank (NYSE:MTB)
  • Pfizer
  • State Street
  • US Bancorp (NYSE:USB)

In contrast, the only new additions were Brown-Forman (NYSE:BF-B) and Cintas (NASDAQ:CTAS).

That's a net loss of eight companies. Some think that a much smaller group of companies presents a problem for the list, but it's probably best not to mess with the system. In time, the list can grow again, slowly but surely.

Dividends matter
It's important to drill into our heads the power of dividends. According to Standard & Poor's, if you invested a single dollar into the S&P 500 at the beginning of 1930, it would have grown to $42 by the end of 2007. But if you'd reinvested the dividends you received along the way, instead of taking them in cash, you'd have amazingly amassed $1,052 instead of $42! Between 1926 and 2008, dividend income accounted for roughly one-third of the S&P 500's total return.

You can see that powerful compounding reflected in the recent performance of the Aristocrats:

Total annualized return of...

Three years

Five years

S&P Dividend Aristocrats

(1.1%)

3.3%

S&P 500

(5.6%)

0.4%

Source: Standard and Poor's. As of Dec. 31, 2009.

As you invest, keep an eye on companies that pay steady, growing dividends. They can make great additions to your portfolio -- and your IRA. Cintas has doubled its dividend since 2001, and while that kind of rate may not continue, it's still a sign of strength. Brown-Forman has doubled its payout since 2003, and it's maintained consistent growth in its dividend over the past quarter-century.

Dividend Aristocrats are one good place to look for winners, but membership today isn't a guarantee of membership tomorrow. And remember, aristocracy isn't everything. Even beyond the list, there are many terrific dividend payers with track records just five or 10 or 24 years long.

To see all the powerful payout potentates we've picked, take a free trial to our Motley Fool Income Investor newsletter.

Longtime Fool contributor Selena Maranjian owns shares of General Electric. Cintas is a Motley Fool Stock Advisor pick. Cintas and Pfizer are Motley Fool Inside Value recommendations. The Fool owns shares of Legg Mason. Try any of our investing newsletters free for 30 days. The Motley Fool is Fools writing for Fools.