Dividend Aristocrats: What They Are And How To Invest In Them Bankrate Caret RightMain Menu Mortgage Mortgages Financing a home purchase Refinancing your existing loan Finding the right lender Additional Resources Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Bank Banking Compare Accounts Use calculators Get advice Bank reviews Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Credit Card Credit cards Compare by category Compare by credit needed Compare by issuer Get advice Looking for the perfect credit card? Narrow your search with CardMatch Caret RightMain Menu Loan Loans Personal Loans Student Loans Auto Loans Loan calculators Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Invest Investing Best of Brokerages and robo-advisors Learn the basics Additional resources Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Home Equity Home equity Get the best rates Lender reviews Use calculators Knowledge base Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Loan Home Improvement Real estate Selling a home Buying a home Finding the right agent Additional resources Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Insurance Insurance Car insurance Homeowners insurance Other insurance Company reviews Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Retirement Retirement Retirement plans & accounts Learn the basics Retirement calculators Additional resources Elevate your Bankrate experience Get insider access to our best financial tools and content Advertiser Disclosure
Advertiser Disclosure
We are an independent, advertising-supported comparison service. Our goal is to help you make smarter financial decisions by providing you with interactive tools and financial calculators, publishing original and objective content, by enabling you to conduct research and compare information for free - so that you can make financial decisions with confidence.
Our articles, interactive tools, and hypothetical examples contain information to help you conduct research but are not intended to serve as investment advice, and we cannot guarantee that this information is applicable or accurate to your personal circumstances. Any estimates based on past performance do not a guarantee future performance, and prior to making any investment you should discuss your specific investment needs or seek advice from a qualified professional. How We Make Money
The offers that appear on this site are from companies that compensate us. This compensation may impact how and where products appear on this site, including, for example, the order in which they may appear within the listing categories. But this compensation does not influence the information we publish, or the reviews that you see on this site. We do not include the universe of companies or financial offers that may be available to you. Editorial disclosure
All reviews are prepared by our staff. Opinions expressed are solely those of the reviewer and have not been reviewed or approved by any advertiser. The information, including any rates, terms and fees associated with financial products, presented in the review is accurate as of the date of publication. SHARE: shapecharge/Getty Images August 12, 2022 Bankrate senior reporter James F. Royal, Ph.D., covers investing and wealth management. His work has been cited by CNBC, the Washington Post, The New York Times and more. Brian Beers is the managing editor for the Wealth team at Bankrate. He oversees editorial coverage of banking, investing, the economy and all things money. Bankrate logo The Bankrate promise
At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict editorial integrity, this post may contain references to products from our partners. Here's an explanation for how we make money. Bankrate logo The Bankrate promise
Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next. Bankrate follows a strict , so you can trust that we’re putting your interests first. All of our content is authored by and edited by , who ensure everything we publish is objective, accurate and trustworthy. Our investing reporters and editors focus on the points consumers care about most — how to get started, the best brokers, types of investment accounts, how to choose investments and more — so you can feel confident when investing your money. Investing disclosure: The investment information provided in this table is for informational and general educational purposes only and should not be construed as investment or financial advice. Bankrate does not offer advisory or brokerage services, nor does it provide individualized recommendations or personalized investment advice. Investment decisions should be based on an evaluation of your own personal financial situation, needs, risk tolerance and investment objectives. Investing involves risk including the potential loss of principal. Bankrate logo Editorial integrity
Bankrate follows a strict , so you can trust that we’re putting your interests first. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. Key Principles
We value your trust. Our mission is to provide readers with accurate and unbiased information, and we have editorial standards in place to ensure that happens. Our editors and reporters thoroughly fact-check editorial content to ensure the information you’re reading is accurate. We maintain a firewall between our advertisers and our editorial team. Our editorial team does not receive direct compensation from our advertisers. Editorial Independence
Bankrate’s editorial team writes on behalf of YOU – the reader. Our goal is to give you the best advice to help you make smart personal finance decisions. We follow strict guidelines to ensure that our editorial content is not influenced by advertisers. Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy. So, whether you’re reading an article or a review, you can trust that you’re getting credible and dependable information. Bankrate logo How we make money
You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey. Bankrate follows a strict , so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers. We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. Dividend Aristocrats are a special category of with a long track record of making – and increasing – their payouts. Because of their stable and rising payouts, a collection of these dividend dynamos can form the basis of a lucrative income-paying portfolio. Here’s what Dividend Aristocrats are and why they may be just what your portfolio needs. What are Dividend Aristocrats
Dividend Aristocrats are some of the most stable dividend payers in the stock market. To qualify as a Dividend Aristocrat, a company needs to meet the following criteria: Be part of the Pay and raise its dividend for at least 25 straight years Have a market capitalization of at least $3 billion Have an average daily trading volume of at least $5 million These criteria ensure that only relatively large, stable companies make the cut for being an aristocrat. So the list of Dividend Aristocrats is composed of with solid, cash-generating businesses. These companies are usually slow-growth, meaning they don’t have many places to reinvest their free cash flow, allowing them to pay it out to shareholders. Because of this, you’re not likely to find the next hyper-growth company among this group, but you will tend to find companies with resilient business models that can keep the cash flowing. And as impressive as being a Dividend Aristocrat sounds, there’s a group for those companies that go a step further, increasing their payouts for 50 straight years – Dividend Kings. Top-yielding Dividend Aristocrats
Just 65 companies comprise the Dividend Aristocrats in 2022, and you may not be familiar with many of them, despite their history of attractive payouts. Here are the top 20 by their dividend yield (data as of Aug. 11, 2022): STOCK AND DIVIDEND YIELD IBM (IBM): 5 percent Amcor (AMCR): 3.8 percent Walgreens Boots Alliance (WBA): 4.9 percent T. Rowe Price Group (TROW): 3.8 percent V.F. Corp. (VFC): 4.4 percent Chevron (CVX): 3.7 percent Leggett & Platt (LEG): 4.3 percent Stanley Black & Decker (SWK): 3.5 percent Franklin Resources (BEN): 4.1 percent Kimberly-Clark (KMB): 3.4 percent Realty Income (O): 4.0 percent Clorox (CLX): 3.3 percent AbbVie (ABBV): 4.0 percent Consolidated Edison (ED): 3.2 percent 3M (MMM): 4.0 percent Cardinal Health (CAH): 3.2 percent Federal Realty Investment Trust (FRT): 4.0 percent Essex Property Trust (ESS): 3.0 percent Exxon Mobil (XOM): 3.9 percent Medtronic (MDT): 2.9 percent While some investors shoot for the highest current yield on their dividend stocks, others look for those that can grow their payouts over time. Those latter stocks may have smaller current yields, but they can boost their dividend over time, sometimes 9 or 10 percent over long periods. How to invest in dividend stocks
If you’re interested in being a dividend investor, you have two big options for doing so: pick and choose individual stocks yourself or buy a fund of dividend stocks. If you’re , you’ll need to do a lot of work to understand the industry, the company’s competitive advantage and the financials, among many other things. Investing in individual stocks goes well beyond just figuring out the dividend yield and buying the stock. Most companies pay dividends quarterly. The firm’s board of directors formally announces the dividend and pay date each quarter through a press release or a filing with the Securities and Exchange Commission (SEC). The money is then sent directly to your brokerage account. If you’re investing in individual stocks, you’ll want to be aware of some key dates: Record date: Investors who are recorded as shareholders as of this day will receive the dividend payment. Ex-dividend date: Starting this day, shareholders who purchase the stock will no longer receive the next dividend payment. Payment date: On this day, investors will receive the dividend payment. On the ex-dividend day, before the stock even trades, its price is adjusted downward by the amount of the dividend, and then days or sometimes weeks later on the payment date, the dividend will appear in your account. If you’re looking to invest in Dividend Aristocrats through a fund, fund manager Pro Shares has an ETF especially for that, the S&P 500 Dividend Aristocrats ETF (NOBL). Another option is the SPDR S&P Dividend ETF (SDY). Both funds pay dividends quarterly. The big advantage of investing in a fund is that you can have a complete portfolio of dividend stocks from the beginning. You’ll enjoy since you own a portfolio of stocks with every dollar you invest. This diversification means that no single stock will hurt your portfolio too badly, reducing your risk. And you won’t have to track and analyze every position, as you would with individual stocks, making it much easier to follow and a . What to watch out for when investing in dividend stocks
If you’re investing in individual dividend stocks, you’ll want to pay particular attention to a few things: Taxes: Any dividends you receive are taxable unless they’re inside a tax-advantaged account such as an or . And that’s true even if you reinvest your payouts into more shares of the stock or fund. Qualified dividends are taxed at the more favorable , as compared to the . Payout ratio: The payout ratio is the percentage of the company’s profits that are paid out as dividends. The higher the ratio, the more precarious the dividend. If a company pays out 80 percent of its earnings, then a small dip in its fortunes, maybe during a recession, could force the company to cut its dividend. Watch this figure closely. On the other hand, a low ratio allows a company to increase its payout even faster than its earnings growth. Eroding competitive position: Dividend-paying companies tend to be slow-growth, often with few places to invest their excess cash flow. But for others, the core business may actually be shrinking or the company may not be reinvesting in its business, meaning that it’s slowly losing its competitive position in the industry. So while the dividend looks good today, it may end up being cut tomorrow as profitability falls. Those are just a few key issues with dividend stocks, and you’ll want to look closely at other aspects of the individual business. These areas of concern (the tax issues, excepted) are mostly moot for investors in a dividend stock fund because it’s composed of many companies. Bottom line
If you’re looking for dividend stocks with a strong track record, it’s hard to do better than the Dividend Aristocrats. These stocks can be a great place to start your research on attractive dividend-paying companies, but you still need to carefully analyze each company. If you’d like the simple but still lucrative option, check out funds that invest in these dividend stalwarts. Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation. SHARE: Bankrate senior reporter James F. Royal, Ph.D., covers investing and wealth management. His work has been cited by CNBC, the Washington Post, The New York Times and more. Brian Beers is the managing editor for the Wealth team at Bankrate. He oversees editorial coverage of banking, investing, the economy and all things money. Related Articles