These 19 US Dividend Aristocrats Provide Attractive Consistency for Investors

For the purposes of this article, I’m restricting the discussion to the S&P 500 dividend aristocrats.

S&P 500 Dividend Aristocrats Feature Unique Traits

Because the index measures dividend increases based on the total dividend per share paid during a calendar year, a company doesn’t necessarily have to raise its quarterly dividend rate during each year to keep a streak going. For example, if a company generally declares a dividend increase with a midyear dividend payment, it can forgo a raise during the following year and still maintain its streak, provided that it raises its dividend at some point during the subsequent year.

Another quirk is that companies that are less than 25 years old can appear in the S&P 500 Dividend Aristocrats Index. For example, Kenvue KVUE was spun off from Johnson & Johnson JNJ in 2023, but it is deemed an aristocrat because of J&J’s long history of dividend increases, even though the dividend that Kenvue pays next month will only be its seventh dividend payment. Conversely, Altria MO, which is an S&P constituent and given credit by some dividend trackers for 55 years of consecutive dividend increases, isn’t included in the S&P 500 Dividend Aristocrats Index. Presumably, this is because S&P isn’t giving Altria credit for dividends paid before it was spun off from Philip Morris International PM in 2008.

Dividend Aristocrats Benefit From Maturity

A streak of annual dividend increases of any length is a positive sign, but just as you’d never buy a stock based on yield alone, a streak by itself is not enough to make a stock appropriate for a dividend portfolio. Still, by definition, the dividend aristocrats are all mature companies, ones with earnings strong enough to fund and increase their dividend payouts. A streak of 25 years or more also highlights management teams that clearly prioritize maintaining and growing the dividend, even through periods of economic uncertainty or earnings stress. A good example is ExxonMobil XOM, which increased its debt to maintain (and modestly increase) its dividend in 2020.

Further, it’s no surprise that consumer defensive stocks like Coca-Cola KO, PepsiCo PEP, and Procter & Gamble PG have the largest representation—16 names—on the dividend aristocrats list. They’re followed closely by industrials stocks, which account for 14 dividend aristocrats. The financial-services sector contributes nine names, while basic materials and healthcare each contribute seven names. Somewhat surprisingly, of the 32 utilities that appear in the S&P 500, just four are aristocrats.

Of the 69 S&P aristocrats, 63 are currently covered by Morningstar equity research analysts. Of those, 32 receive Morningstar Economic Moat Ratings of wide, 21 receive narrow moat ratings, and 10 are rated as having no moat.

Yields Can Be Modest for Some Dividend Aristocrats

Twenty-five years of consecutive dividend growth doesn’t necessarily result in a high-yielding stock. While the highest-yielding dividend aristocrat (Franklin Resources BEN) currently yields 6.3%, 25 of them yield less than 2.0%, and nine yield less than 1%, including West Pharmaceutical Services WST, which yields a mere 0.3%.

On average, the 69 dividend aristocrats yield 2.5%. Over the past five years, the current dividend aristocrats (excluding Kenvue) have generated an average yield of 2.3%. I’ll also note that the 12-month yield of ProShares S&P 500 Dividend Aristocrats ETF is just 2.0%.

Dividend Aristocrats Are Not Immune to Market Forces

Are dividend aristocrats less likely to cut or suspend their dividends? A streak of annual dividend increases of any length provides no guarantee that a company’s dividend is secure. However, when a management team frequently points to the length of such streaks during earnings calls and in annual reports, I think it’s a reasonable assumption that the team will, when making decisions about capital allocation, prioritize the maintenance and growth of the dividend. Still, one doesn’t have to look too far into the past to find examples of former aristocrats that have reduced their dividends: VF VFC was removed from the index after it cut its dividend (twice!) in 2023. AT&T T slashed its dividend rate by 46% in 2022 and hasn’t increased it since. And 3M MMM lost its dividend aristocrat status in 2024 when management indicated that it would reduce its dividend following the spinoff of 3M’s healthcare division. (Before this announcement, 3M had been the highest-yielding dividend aristocrat.)

Nevertheless, 2020 was a pretty good test of the durability of the dividends of the aristocrats. When the covid pandemic began in March of that year, consumer demand plummeted in a number of sectors and industries. Dozens of companies cut or suspended dividends that year. Some did so proactively, while others did so because their acceptance of stimulus funds mandated it. In total, 66 companies that were S&P 500 constituents at the end of 2020 paid out less in dividends that year than they did in 2019. Some of the biggest names included Walt Disney DIS and General Motors GM, along with a slew of airlines and hotels. But of the dividend aristocrats, Ross Stores ROST was the only one to cut or suspend its dividend in 2020.

Some More Compelling Dividend Aristocrats

Given that not all dividend aristocrats are attractive from a current yield or valuation standpoint, I screened the list of the 69 S&P 500 Dividend Aristocrats Index stocks to create the list below. It includes all of the dividend aristocrats that:

• Have a wide or narrow moat rating;
• Yield at least 2.5%;
• Trade at no more than a 5% premium to their Morningstar fair value estimates.

The 19 stocks that passed this screen have an average yield of 3.5% and trade, on average, at an 11% discount to fair value.

Again, lengthy streaks of annual dividend increases are a positive thing, and the companies that hold them—assuming attractive current yields, valuations, and prospects for future dividend growth—can be worthy investments. Yet investors should keep in mind that restricting an income-focused portfolio solely to dividend aristocrats also means passing up some younger dividend payers that might have the prospect of greater near-term dividend growth and are more attractive when considering their current yields and valuations.

A version of this article first appeared in the May 2024 issue of Morningstar DividendInvestor. Download a complimentary copy of DividendInvestor by visiting this website.

The author or authors do own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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