This is a rudimentary article and most of you may already know the information presented here; however, this article will help the SA members who are just starting up.
When I started investing in the stock market last year, I was naïve and my knowledge regarding investing was only surficial. Luckily for me, I stumbled upon dividend paying stocks, as compared to momentum stocks and/or non-dividend paying stocks. Soon after, I came across a group of companies called the Dividend Aristocrats: which had a long history of paying out increasing dividends a.k.a over courses of many crises, downturns, market-busts, etc. This got me thinking, if I invested in these companies, I could be golden.
However, as I started reading more, increasing my span of research, I came across other noteworthy dividend paying companies, namely:
1) Dividend Kings
2) Dividend Champions, Contenders, Challengers
3) Dividend Achievers
It has been more than an year since, and I believe, I have I have something I can share. I will start with Dividend Aristocrats, as these are the most popular:
1) Dividend Aristocrats are group of companies that have increased their dividend payouts for at least 25 consecutive years. Additionally, these companies must:
• Be a member of Standard & Poor (S&P) 500;
• Have a float-adjusted market capitalization of at least $3 billion; and,
• Have an average trading volume of at least $5 million.
The S&P 500 Dividend Aristocrats Index (INDEXSP:SPHYDA) tracks the performance of these companies; and, S&P will remove them from the index if they fail to increase their dividends from the previous year or if they are removed from S&P 500 itself. This happened during the recession of 2008-2009: Companies like Bank of America, General Electric etc. were removed from the index as they reduced their dividends.
As of January 2014, there are 54 constituents in this index. The index is updated annually in January. It is equally weighted and S&P "treats each constituent as a distinct investment opportunity without regard to its size."
The ETFs SDY and NOBL closely tracks the index SPHYDA.
2) Dividend Champions, Contenders, and Challengers
Dividend Champions are all publicly traded companies (not just in S&P 500) in the US, which have raised their dividends for at least 25 consecutive years. The list is maintained by David Fish and is THE most exhaustive list of dividend growth stocks. As of June 2014, the list contains 106 companies with an average yield of 2.53%.
Many investors consider this list to be better (now this is one understatement) than the Dividend Aristocrats; the reason being:
• Comprehensive nature of the list because it is not bounded by requirements such as minimum market capitalization or index membership; and,
• This list contains notable companies like Altria, which have increased their dividend payouts for more than 25 years and are a part of S&P 500, yet still are not a part of the Dividend Aristocrats.
The most up to date list can be downloaded here.
Dividend Champions contains two other list of companies:
Dividend Contenders are companies that have increased their dividends for at least 10 consecutive years. As of June 2014, the list contains 231 companies with an average yield of 2.67%.
Dividend Challengers are companies that have increased their dividends for at least 5 consecutive years. As of June 2014, the list contains 203 companies with an average yield of 3.03%.
3) Dividend Achievers are a group of companies with at least 10 consecutive years of increasing annual regular dividend payments. This list is maintained by Mergent, Inc. and has following additional requirements:
• The company must be incorporated in the United States or its territories;,
• Trade on the NYSE, NASDAQ or AMEX; and,
• The stock's average daily cash volume must exceed $500,000 per day in November and December, prior to reconstitution of the list.
This list is updated annually and, as of January 2014, there are 240 companies in the list. The NASDAQ US Broad Dividend Achievers Index (INDEXNASDAQ:DAA) tracks the performance of these companies.
4) Dividend Kings includes companies which have managed to raise dividends for at least 50 years in a row. This is really an impressive achievement, because, these companies have weathered quite a few headwinds. As of January 2014, there are only 17 companies in this very elite group.
Here are the tickers of Dividend Kings: AWR, CINF, CL, DBD, DOV, EMR, GPC, JNJ, KO, LANC, LOW, MMM, NDSN, PG, PH, and VVC
That's all, folks! I hope you find this information useful.
Disclosure: The author is long ARCP, GE, SAN, ORI, OHI, O, HCP, KO, INTC, SO, T. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it. The author has no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: I am just an individual investor and not a Financial Advisor/Wealth Manager.