- KO, MMM, DOV, JNJ, PG, EMR, & LOW are the only 7 businesses that have remained dividend aristocrats from 1989 to today.
- A portfolio of these 7 stocks would have turned $10,000 into $336,431.75 today; a CAGR of 14.91%.
- Top Dividend Aristocrats that resemble the 7 great dividend aristocrats of the last 25 years.
The Dividend Aristocrats are a select group of S&P 500 stocks that have paid increasing dividends for 25+ years and meet certain market cap and volume restrictions. In 1989, 26 businesses were on the Dividend Aristocrats list. Of these 26, only 7 are on the list today.
- Dover (NYSE:DOV)
- Emerson Electric (NYSE:EMR)
- Johnson & Johnson (NYSE:JNJ)
- Coca-Cola (NYSE:KO)
- Lowe's (NYSE:LOW)
- 3M (NYSE:MMM)
- Procter & Gamble (NYSE:PG)
Each of these businesses has rewarded shareholders since 1989. The table below shows the compound annual return of each business from the beginning of 1989 to April 15, 2014.
The total stock market (with dividends reinvested) returned 10.09% over the same period. All 7 of these stocks outperformed the total market. A portfolio of these 7 stocks had a compound annual return of 14.91% for this period, well in excess of the stock market as a whole.
Similarities of Top 7
These businesses are well diversified within their broad industries (with the exception of Lowe's). Each business has multiple highly profitable brands, products, and/or services. The size and diversification within each business insulates them from downturns in any one product, service, or division. Size and diversification have made these businesses highly stable for the last several decades.
I have divided these businesses into 3 categories. There is some overlap between the categories. For example, Johnson & Johnson manufactures medical devices, while 3M has many consumer products.
- Procter & Gamble
- Johnson & Johnson
- Lowe's Corporation
- Emerson Electric
Current Dividend Aristocrats Similar to Top Historical Top Performers
The dividend aristocrats below are in the same industries as the 7 remaining dividend aristocrats from 1989. They have a top 3 return on assets in their industry; they are the most profitable dividend aristocrats in these industries.
|Diversified Consumer Products|
|Illinois Tool Works||ITW||10.40%|
Investing in high quality businesses with a low probability of failure is an excellent way to generate high returns with low risk. We can't know ahead of time what businesses will be around 25 years from now, but we can analyze and learn from the past to construct a portfolio with a high probability of strong future returns.
Disclosure: I am long WMT. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.