What Is the S&P 500 Dividend Aristocrats Index?
The S&P 500 Dividend Aristocrats Index is a list of companies from the Standard & Poor's 500 Index (the S&P 500) that have a track record of raising their dividendsfor at least 25 consecutive years. Each company is equally weighted within the index.
Key Takeaways
- The S&P 500 Dividend Aristocrats Index is a list of companies, mainly well-known large-cap,blue-chip companies, in the S&P 500 with a track record of increasing dividendsfor at least 25 consecutive years.
- The S&P 500 Dividend Aristocrats Index includes stocks witha float-adjusted market capitalization of at least $3 billion and an average daily trading volume of at least $5 million.
- A company can be dropped from the S&P 500 Dividend Aristocrats Index if it does not increase its dividend or if it is removed from the broader S&P 500 Index.
Understanding the S&P 500 Dividend Aristocrats Index
The S&P 500 Dividend Aristocrats Index tracks the performance of well-known, mainly large-cap, blue-chip companies. will remove companies from the index when they fail to increase dividend paymentsfrom the previous year. The index is rebalanced quarterly in January, April, July, and October.
The S&P 500 Dividend Aristocrats includes stocks witha float-adjusted market capitalization of at least $3 billion and an average daily trading volume of at least $5 million, in addition to consistently increasing dividend payments.The index requires a minimum of 40 companies and currently has 66 constituents as of July 31, 2023.
The strength of the dividend aristocrats lies in their ability to continually increase dividend payments to shareholders. When compared to the S&P 500 itself, the Aristocrats index has not outperformed the S&P 500, in either 1-year, 3-year, or 5-year annualized returns, as of Aug. 28, 2023.
One criticism of companies on the dividend aristocrats list is they sometimes use share buybacks to facilitate dividend increases. The problem is a true dividend aristocrat should increasepayouts to shareholders from year to year, andif the company is overpaying for its shares,it may not be acting in shareholders’ best interests, even if dividends are increasing.
S&P 500 Dividend Aristocrats Constituents
Dividend aristocrats come from various industries and sectors and are of varying ages; though of course, they have to have been in business for a quarter-century, at least. Some companies have booked dividend growth for decades, such as Emerson Electric Co. (EMR), which sells electronic products and engineering services to industrial clients.
Other companies, like Roper Technologies (ROP), a designer of software and other products, and A.O. Smith (AOS), which makes water heating and purification equipment, became eligible in 2018.
In Jan. 2023, Nordson Corp, CH Robinson Worldwide Inc, and J. M. Smucker Co were added to the index.
While the Dividend Aristocrats Index tends to feature well-known firms, being a blue-chip stock doesn't guarantee inclusion. A company can be dropped from the index if it does not increase its dividend for one year or if it is removed from the broader S&P 500 Index. The 2008 recession, in particular, caused the removal of many big-name companies from the list likeBank of America (BAC), General Electric (GE), and Pfizer (PFE).
Top S&P 500 Dividend Aristocrats
As of July 31, 2023, nearly half of the S&P 500 Dividend Aristocrat companies fall into one of two sectors: industrials (24.1%) or consumer staples (22.8%). Materials (12.5%), financials (11%), and healthcare (10.4%) are other significant sectors. Here are the 10 leading individual companies as of July 31, 2023.
| Top 10 S&P 500 Dividend Aristocrats Constituents by Index Weight | ||
|---|---|---|
| CONSTITUENT | SYMBOL | SECTOR |
| Pentair PLC | PNR | Industrials |
| Stanley Black & Decker Inc | SWK | Industrials |
| Albemarle Corp | ALB | Materials |
| Caterpillar Inc | CAT | Industrials |
| Sherwin-Williams Co | SHW | Materials |
| Nordson Corp | NDSN | Industrials |
| Automatic Data Processing Inc | ADP | Industrials |
| Brown & Brown Inc | BRO | Financials |
| Intl Business Machines Corp | IBM | Information Technology |
| Essex Property Trust | ESS | Real Estate |
Investing in the S&P 500 Dividend Aristocrats
Exchange-traded funds (ETF) are a popular way of gaining exposure to the list of dividendaristocrats. One popular fund that directlyfollows the index is the ProSharesS&P 500 Dividend Aristocrats ETF (NOBL).
Other funds that track dividend stocks but don't directly follow the index include theiSharesSelect Dividend ETF (DVY), theSPDRS&P Global Dividend ETF (WDIV), and the iSharesCore High Dividend ETF (HDV). Even though they're not trying to track the index, each fund tends to includesome of the "aristocrats," since the universe of steadily rising dividend issuers isn't all that diverse.
How Do I Invest in the S&P 500 Dividend Aristocrats?
The best way to invest in the S&P 500 Dividend Aristocrats index is by investing in a fund that tracks the index, such as one of the many SPDR Aristocrats ETFs.
What Is ProShares S&P 500 Dividend Aristocrats?
ProShares S&P 500 Dividend Aristocrats is an exchange-traded fund (ETF) issued by ProShares that seeks to replicate the S&P 500 Dividend Aristocrats Index. It allows individuals seeking returns in the index to be able to invest in it without having to outright purchase the separate shares of each company in the index.
Does the S&P 500 Pay Dividends?
As the , you cannot invest directly in it. You can, however, invest in funds that track the index, such as the SPDR S&P 500 ETF. When you invest in these funds, they pay out the dividends to you.
The Bottom Line
For dividend investors, investing in funds that track the S&P 500 Dividend Aristocrat Index could be a good strategy, as the index is made up of companies that have consistently been raising dividends for at least 25 years. Dividends add a strong income component value to stocks.
Article Sources
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