Dividend stocks have become crucial to generate income for many investors, and many have turned to the Dividend Aristocrats as a source of investment ideas. But there's one key fact you need to know about Dividend Aristocrats before you simply pick a stock from the list and expect it to meet all your needs.
In the following video, Dan Caplinger, The Motley Fool's director of investment planning, explains how Dividend Aristocrats can fail some investors. Dan notes that dividend growth is an essential component of being a Dividend Aristocrat, and stocks on the list have raised their payouts annually for at least 25 years. But Dan also points out that there's no minimum dividend yield for an Aristocrat, using examples of Sherwin-Williams (NYSE:SHW), Franklin Templeton (NYSE:BEN), and Ecolab (NYSE:ECL) with yields in the 1% range. For many investors, yields that low won't meet their income needs, and Dan concludes that you have to look beyond the list and find out exactly how much income you can expect from any given Dividend Aristocrat before deciding whether it's suitable for your portfolio.
Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends 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.
More from The Motley Fool
Even in This Rich Market, Gilead Sciences, Inc. Is Offering Investors Value
Here's why this biotech stock's single-digit earnings multiple looks more like an opportunity than a trap.
3 Top Small-Cap Stocks to Buy in December
Investors should take a closer look at Chuy's Holdings, Codexis, and Renewable Energy Group before 2017 is in the books.
US Concrete Stock: Buy at the High?
The leading infrastructure stock has soared to new heights in 2017. What's ahead for U.S. Concrete?