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Should Retirees Worry About Dividend Cuts From Dividend Aristocrats?

Jul. 11, 2017 10:30 AM ETABT, ADM, ADP, AVY, BAC, TFC, BCR, BDX, BUD, CB, CINF, CLX, CMA, LUMN, DOV, ED, EMR, FHN, FITB, GCI, GE, GWW, JCI, JNJ, KEY, KMB, KO, LEG, LLY, LOW, MCD, MMM, MO, MTB, NUE, PEP, PFE, PG, PGR, PPG, RF, SHW, SLM, SNV, STR-OLD, STT, SVU, SWK, TGT, USB, VFC, WMT34 Comments

Summary

  • The list of dividend aristocrats has shrunken a lot over the last decade.
  • Especially financial corporations cut or eliminated their dividends.
  • The income investors get from a basket of dividend aristocrats can drop, but even during the last financial crisis the drop was rather small.
  • Retirees should keep an eye on their holdings, but extreme fear about dividend cuts is not really justified.

Many retirees and other investors that rely on income from their investments put a big portion of their wealth into dividend growth stocks, especially those characterized as the so called dividend aristocrats. Due to the fact that the current list only includes those stocks that did not cut their dividends in the last 25 years, it looks like dividend cuts do happen very rarely, if at all. When we look at what companies made up that list before the financial crisis, we see that dividend cuts, at least during harsh economic times, are more likely than many investors believe.

In 2007, before the financial crisis, a big list of companies had increased their annual payout for at least 25 years in a row: These dividend aristocrats totaled 59 different companies. A significant portion of these companies have cut their dividends since or has otherwise ceased to pay dividends -- let's look at the list for both the dividend aristocrats from 2007 as well as those that still hold this status today:

The full list from 2007 includes the following companies (courtesy of Eddy Elfenbein):

Abbott Labs (NYSE:ABT)
Archer-Daniels-Midland (NYSE:ADM)
Automatic Data Processing (NASDAQ:ADP)
Avery Dennison (NYSE:AVY)
Bank of America (NYSE:BAC)
BB&T Corporation (NYSE:BBT)
Bard (C.R. Bard) Inc. (NYSE:BCR)
Becton, Dickinson (NYSE:BDX)
Anheuser-Busch (NYSE:BUD)
Chubb (NYSE:CB)
Compass Bancshares
Cincinnati Financial (NASDAQ:CINF)
Clorox (NYSE:CLX)
Comerica (NYSE:CMA)
Century Telephone (NYSE:CTL)
Dover (NYSE:DOV)
Consolidated Edison (NYSE:ED)
Emerson Electric (NYSE:EMR)
Family Dollar Stores
First Horizon National (NYSE:FHN)
Fifth Third Bancorp (NASDAQ:

This article was written by

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Disclosure:

I work together with Darren McCammon on his Marketplace Service Cash Flow Club.

Analyst’s Disclosure: I am/we are long JNJ, MO, PFE, 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.

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