S&P 500's Best Dividend Aristocrats

A Dividend Aristocrat is a company in the S&P 500 index that has paid and increased its base dividend every year for at least 25 consecutive years.

S&P Dow Jones Indices, which owns the S&P 500 index, reviews the list of qualifying companies every year and updates the list of companies that carry Dividend Aristocrat status. Their impressive track records of growth make Dividend Aristocrats some of the most attractive dividend stocks to own.

Dividend Aristocrats list

As of June 29, 2021, there are 65 Dividend Aristocrats. Here's the full list, sorted by how many consecutive years each has increased its dividend:

All data as of June 29, 2021. *Has not increased quarterly dividend in nine quarters and may be removed. Source: S&P Dow Jones Indices and company filings.

There's also a Dividend Kings list. To be a Dividend King, a company has to have boosted its dividend every year for an incredible 50 years in a row.

Dividend Aristocrats changes for 2021

Three companies were removed from the Dividend Aristocrats list for 2021:

• Carrier Global Corp. (NYSE:CARR)
• Otis Worldwide Corp. (NYSE:OTIS)
• Raytheon Technologies Corp. (NYSE:RTX)

Three companies became eligible to join the Dividend Aristocrats list for 2021:

• International Business Machines
• NextEra Energy
• West Pharmaceutical Services

Potential Dividend Aristocrats changes in late 2021

Of the current Dividend Aristocrats, ExxonMobil seems at risk of falling off the list. The company has now gone nine consecutive quarters without increasing its $0.87 per-share dividend, meaning that it has gone far longer than one year since its most recent dividend increase. However, the company's stock has remained part of the Dividend Aristocrats list.

At this point, it's unlikely that the company will have to cut its dividend, and a payout increase could be coming. Removing it from the Dividend Aristocrats list would leave the energy sector severely underrepresented.

Another company some investors assume is set to lose its Dividend Aristocrat status this year is AT&T, which, as of June 2021, has gone seven straight quarters without a dividend increase. In May 2021, the company also said it will change its dividend strategy when the spinout of WarnerMedia is complete, which will result in a lower payout. However, that transaction isn't expected to close until 2022, so it's possible AT&T could remain a Dividend Aristocrat for longer than expected.

How Dividend Aristocrats are selected

Image by The Motley Fool

The standards make it difficult for companies to get on the list. But once a company makes the list, it is likely to stay.

Below are the four criteria to become (and remain) a Dividend Aristocrat:

1. Be a member of the S&P 500.
2. Increase the per-share base dividend (excluding special dividends) every year for at least 25 consecutive years.
3. Have a minimum float-adjusted (excluding "closely held" shares owned by insiders or founders) market capitalization of at least $3 billion.
4. Average at least $5 million in daily share trading value for the three months prior.

When is the Dividend Aristocrats list updated?

The Dividend Aristocrats list is updated at several frequencies by S&P Dow Jones Indices:

• Once each year in January, companies are added and removed based on the requirements.
• At the beginning of each quarter, the index is reweighted, meaning the size of each constituent is reset so that they all make up an equal percentage of the index.
• On rare occasions, a stock may lose Dividend Aristocrat status.

While the Dividend Aristocrat index, by nature, doesn't change much, more companies tend to lose their status during recessions. In 2009 and 2010, 19 total companies (half of which were banks or financial institutions) fell off the list after cutting dividends due to the global financial crisis.

Image source: Getty Images.

Are Dividend Aristocrats good investments?

Historically speaking, yes, but it depends on what you're looking for from your investment. The pros of investing in Dividend Aristocrats include:

• Reliability: Fans of dividend investing appreciate a reliable source of income.
• Industry leaders: These companies tend to be leaders in their industries with reliable cash flow and a track record of impressive annual returns.
• Reduced volatility: Dividend Aristocrats are less volatile than the broader market.

That being said, in recent history, Dividend Aristocrats have underperformed the S&P 500 in total returns. The chart below shows how the ProShares S&P 500 Dividend Aristocrats ETF (NYSEMKT:NOBL) index fund has performed in total returns — which includes dividends — since its inception in late 2013:

NOBL Total Return Level data by YCharts.

So why would investors still look at the S&P Dividend Aristocrats?

When it comes to dividend growth, Dividend Aristocrats absolutely shine. The Dividend Aristocrats Index has increased the dividend payout five times faster than the S&P 500 since the ProShares S&P 500 Dividend Aristocrats ETF paid its first dividend in early 2014.

NOBL Dividend data by YCharts.

For investors looking to maximize dividend growth, Dividend Aristocrats remain compelling. 

Is there a Dividend Aristocrats index fund?

Yes, the ProShares S&P 500 Dividend Aristocrats ETF is a low-cost index fund that makes it simple to own the full Dividend Aristocrats list.

Those looking for a simple, low-cost way to invest in the entire Dividend Aristocrats universe should give this exchange traded fund (ETF) consideration. 

Should you buy individual Dividend Aristocrat stocks?

Your long- and short-term objectives, as well as the kinds of companies you want to own, come into play. 

For instance, if you're looking for immediate income, you may want to avoid companies with lower dividend payouts. If long-term growth is your focus, you may be better off buying Dividend Aristocrats with higher growth prospects, even if they have lower dividend payouts.

Whether you're looking to pick individual stocks to suit your investing style and goals or for other reasons, such as socially responsible investing goals, Dividend Aristocrats can be an excellent starting point for finding the best-in-class dividend growth stocks.