With inflation soaring to its highest level in over four decades, surpassing 6.5%, dividend stocks present an excellent means of outpacing inflation while establishing a reliable source of income.
Understanding Dividend Aristocrats
So, what exactly is a “Dividend Aristocrat”? An aristocrat in the world of investing refers to a company that has not only survived but thrived for many years. When we apply this term to dividends, it signifies companies that have consistently increased their dividend payouts to shareholders for an extended period, often 25 years or more.
Small Cap vs. Large Cap vs. Industry vs. Sector
Dividend aristocrats come in various categories: small-cap (market cap $300M-$2B), large-cap (market cap >$10B), industry-specific, and sector-specific. Their common trait is a consistent history of paying and increasing dividends over time.
Certain aristocrats excel in specific industries, like beverage or pharmaceuticals.
Others stand out within broader sectors, such as information technology.
The S&P 500 Dividend Aristocrat
The Dividend Aristocrat list consists of S&P 500 companies with a 25-year dividend increase streak, emphasizing their commitment to shareholders. Managed by S&P Dow Jones Indices, it’s prestigious for consistent dividend growth. Updated yearly, changes take effect on February 1st, with December 31st as the reference date. Companies losing S&P 500 status are promptly removed.
In 2023, Nordson (Equipment manufacturer), CH Robinson Worldwide (transportation), and J. M. Smucker (Food & beverages) were added