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John D. Rockefeller once said, “Do you know the only thing that gives me pleasure? It’s to see my dividends coming in.”
Whether you agree or not, you can’t blame Rockefeller for being excited about his dividend income. It’s a powerful tool for compounding wealth over the long term.
From January 2000 to January 2020, the S&P 500 index returned 129.95% without accounting for dividends. But if you had reinvested all of the dividends paid by the stocks in the index during that time, the return would've jumped up to 235.65%.
That said, there is a group of stocks within the S&P 500 that pays dividends much more reliably than other companies. That group is called the dividend aristocrats.
What is a dividend aristocrat?
A dividend aristocrat is an S&P 500 stock that has increased its dividend every year for at least 25 years.
Increasing its dividend means the company increased the dollar value of dividends per share. The dividend aristocrats don't necessarily need to increase their dividend yields over time. (Dividend yield is a percentage calculated by dividing the last 12 months of dividends per share by the current share price. It fluctuates with the market.)
There are 64 dividend aristocrats today, and they’re a diverse bunch. They’re distributed across many different parts of the economy, including the health care, consumer staples, financial and industrial sectors.
However, they do have a couple of things in common. The first is that they’re established — to meet the 25-year-dividend-raiser criteria, they must have been a publicly traded company for at least 25 years. You won't find any stock market newcomers such as Tesla among the dividend aristocrats.
Second, they are all large-cap stocks. To be dividend aristocrats, they must be S&P 500 companies, and in order to be S&P 500 companies, they must have a market capitalization of at least $13.1 billion.
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The top 25 dividend aristocrats list
Below is a list of the top 25 dividend aristocrats ordered by current dividend yield.
Walgreens Boots Alliance
Federal Realty Investment Trust
Realty Income Corp.
T. Rowe Price
Stanley Black & Decker
Essex Property Trust
Cincinnati Financial Corp.
Air Products & Chemicals
Stock data is current as of August 2, 2022 from Google Finance, and is intended solely for informational purposes, not for trading purposes.
Dividend aristocrats ETFs
The shares shown above have a combined market price of thousands of dollars — a steep purchase for most investors.
On top of that, it’s wise to research an individual stock before you buy it, and the time cost of researching 25 individual stocks — or even a smaller group — could be substantial.
If you’re looking to gain exposure to the dividend aristocrats, but don’t want to spend the time and money to buy the individual stocks, you could consider buying exchange-traded funds, or ETFs, that contain dividend-raising stocks instead.
The ProShares S&P 500 Dividend Aristocrats ETF is the only one that strictly tracks the 64 official S&P 500 dividend aristocrats. There are a variety of other funds that contain similar groups of stocks that consistently raise their dividends over time.
» Learn more about investing in index funds
Neither the author nor editor held positions in the aforementioned investments at the time of publication.