Investing in Dividend Aristocrats

The S&P 500 Dividend Aristocrat index of stocks includes companies that have had a history of at least 25 years of dividend increases. Each member must be a large cap, blue chip company that is already included in the S&P 500. These companies have market caps of $5 billion or more, have stable earnings, few liabilities, and pay regular dividends.

Each December, the aristocrat index is rebalanced with stocks falling off the list and others being added. Any company that decides to cut or freeze its dividend over the course of 12 months will be dropped from the index. Other members of the S&P 500 who reach 25 consecutive years of dividend increases will be added at the same time in December.

Successful income investors use the dividend aristocrats index to quickly identify the best dividend stocks. Since the members that comprise this list are all required to have had a dividend increase annually for at least 25 years, it is a good place to find investment ideas. These dividend stocks may not be the most glamorous growth opportunities, but can provide a stable investment choice during any economic climate.

Just as any other investment, an investor must do their own due diligence before buying or selling a stock on this list. In some cases, stocks on the list may be very poor investment choices, regardless of the strong dividend history. For example, during the economic crunch, many banking stocks that had been increasing dividends for over 25 years decided to make cuts. Since the list is not updated throughout the year, a stock that has made a dividend cut could still be included before it is updated in December.

Do you use the dividend aristocrat index to find income investment options?