Intelligent REITs Qualifying As Dividend Aristocrats

by: Brad Thomas

Late last month, S&P said it was revising its Dow Jones Indices "Dividend Aristocrat" list requirements to include issues that have increased their annual regular cash dividend payments for at least 20 consecutive years (down from the prior requirement of at least 25 consecutive years).

S&P says its High Yield Dividend Aristocrats list is designed to measure the performance of companies within the S&P Composite 1500 that have followed a managed-dividends policy of consistently increasing dividends every year for at least 20 years. It's weighted by indicated annual dividend yield, with constituents being re-weighted every quarter and the qualifying universe is reviewed once a year in January.

Companies included in the S&P High Yield Dividend Aristocrats come from a broad spectrum of industries, and S&P says that unlike indices that focus only on high dividend yields, which are typically from the Financials and Utilities sectors, the "Dividend Aristocrats" are well diversified across all sectors. Here is a list of the fourteen stocks recently added to the "Dividend Aristocrat" list after it lowered the bar for how companies must qualify for that list:

The newly qualified dividend-paying companies include Aqua America Inc. (WTR), Atmos Energy Corp. (ATO), Avon Products (AVP), Cardinal Health Inc. (CAH), Chevron Corp. (CVX), Community Bank System (CBU), General Dynamics (GD), MDU Resources Group Inc.(MDU), National Retail Properties Inc. (NNN), SEI Investments Corp. (SEIC), UGI Corp.(UGI), Universal Corp. (UVV), Universal Health Realty Trust (UHT), and Westamerica Bancorporation (WABC).

REITs Qualifying as Dividend Aristocrats

The value of measuring streaks of dividend increases is in showing a company's ability to get through good times and bad while still treating their shareholders right. It's easy to raise dividends during good times, but being able to sustain and grow dividend payouts even during recessions and other turbulent market environments demonstrates how strong a dividend stock is.

Conversely, the new dividend aristocrats include two (2) REITs that are now included in the elite club of dividend excellence. National Retail Properties and Universal Health Realty Trust are new members that will join veteran REIT aristocrats Federal Realty (FRT), Washington REIT (WRE), and HCP Inc. (HCP). Tanger Factory Outlets (SKT) is a few months away from the recently revised 20 year dividend bar.

As the legendary Ben Graham wrote in his timeless classic, The Intelligent Investor:

The defensive investor must confine himself to the shares of important companies with a long record of profitable operations and in strong financial condition.

So as Graham believed, paying out a dividend does not guarantee great results, but it help to distinguish the difference in an "investment operation and a speculative one." Furthermore, Graham explained,

One of the most persuasive tests of high-quality is an uninterrupted record of dividend payments going back over many years. We think that a record of continuous dividend payments for the last 20 years or more is an important plus factor in the company's quality rating.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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