Income investors love dividend stocks that have long track records of successfully sending checks to shareholders quarter in and quarter out over the years. One popular set of dividend stocks, the Dividend Aristocrats, features stocks that have raised their payouts annually for at least 25 years. But are all Dividend Aristocrats great dividend stocks?
In the following video, Dan Caplinger, The Motley Fool's director of investment planning, takes a look at a couple of ways that Dividend Aristocrats can prove disappointing for dividend investors. First, Dan notes that the only requirement for the list is the 25-year track record. That means that Dividend Aristocrats don't have to have high yields, nor do they have to make large increases in their payouts. Dan gives examples of each phenomenon, pointing to Franklin Resources (NYSE:BEN), Ecolab (NYSE:ECL) and Sherwin-Williams (NYSE:SHW) as low-yielding Dividend Aristocrats. Meanwhile, Nucor (NYSE:NUE) and Diebold (NYSE:DBD) have made only tiny quarter-penny increases recently to keep their streaks alive. Dan concludes that you have to look past the Aristocrat label to see if a particular stock makes the grade for your portfolio.
Fool contributor Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Nucor and Sherwin-Williams and owns shares of Ecolab. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.