Most stocks on a new screen have outperformed the S&P 500 in the long term
The S&P Dividend Aristocrats deserve more coverage.
Those are companies that have raised their dividend payouts consistently over the years — they’re dividend royalty, as it were. As a group, they have performed well in the long term. And they held up well in 2022, a year in which broad indexes fell into a bear market.
Below is a screen of the 15 Aristocrats that have raised dividends the most over the past five years. There is another list showing how well stocks listed a year ago in a similar screen have performed.
Despite the focus on dividends, the best way to think about the Aristocrats may be as a long-term growth strategy. The first and oldest group of Aristocrats tracked by S&P Dow Jones Indices is the set of 64 companies in the S&P 500 Dividend Aristocrats Index XX:SP50DIV. These are companies in the benchmark S&P 500 SPX that have raised regular dividends for at least 25 consecutive years. That is the only requirement — it makes no difference how high a stock’s dividend yield is.
One way to play the S&P 500 Dividend Aristocrats as a group is to hold shares of the ProShares S&P 500 Dividend Aristocrats ETF NOBL (
|ETF or Index||1 year||3 years||5 years||10 years||15 years||20 years|
|ProShares S&P 500 Dividend Aristocrats ETF||-4%||30%||58%||N/A||N/A||N/A|
|S&P 500 Dividend Aristocrats||-4%||32%||61%||235%||437%||751%|
|SPDR S&P 500 ETF Trust||-16%||26%||55%||219%||269%||513%|
If we had run a similar comparison during the long bull market, the Dividend Aristocrats may not have fared so well. For example, for five years through 2021, NOBL returned 103%, while SPY returned 132%. Last year’s 18% decline for SPY made quite a difference.
The best dividend compounders
If you are building a nest egg for retirement, chances are you will want to shift your focus to income generation at some point. You might select stocks with high dividend yields, but a high current payout could be a sign that investors aren’t confident a company can maintain its dividend — if the stock price has fallen, the dividend yield has gone up, at least until the payout is cut.
If you hold shares for many years, and a company raises its dividend year after year, you might build up an income stream with an attractive yield — relative to the price you paid for the shares years ago.
For example, if you bought shares of AbbVie Inc. ABBV (
So here is a new expanded screen to look at compound annual growth rates (CAGR). This time around, we are expanding beyond the S&P 500 Dividend Aristocrats to include two other groups of companies that consistently raise payouts, as tracked by S&P Dow Jones Indices:
- The S&P 400 Dividend Aristocrats Index has 45 stocks of companies that have raised dividends for at least 15 consecutive years, drawn from the S&P Mid Cap 400 Index MID. It is tracked by the ProShares S&P MidCap 400 Dividend Aristocrats ETF REGL (
- The S&P High Yield Dividend Aristocrats Index XX:SPHYDA is made up of the 119 stocks in the S&P Composite 1500 Index XX:SP1500 that have increased dividends for at least 20 straight years. It is tracked by the SPDR S&P Dividend ETF SDY. The S&P Composite 1500 is combination of the S&P 500, the S&P Mid Cap 400 and the S&P 600 Small Cap Index SML. So the S&P High Yield Dividend Aristocrats Index includes all the stocks in the S&P 500 Dividend Aristocrats Index. But it excludes some that are in the S&P 400 Dividend Aristocrats Index. The name of the High Yield Dividend Aristocrats Index is confusing because the yields aren’t necessarily high — they range from 0.33% to 6.91%.
Altogether, there are 134 S&P Dividend Aristocrats.
For our dividend growth review, we looked at regular dividend payouts five years ago to narrow the list to 74 that had dividend yields of at least 2.00% at that time.
Among the 74 companies, here are the 15 that have increased their dividend payouts the most over the past five years. The list is sorted by five-year CAGR for annual dividend rates:
|Company||Ticker||Five-year dividend CAGR||Dividend yield on shares purchased five years ago||Dividend yield – five years ago||Current dividend yield||Price change – 5 years||Total return – 5 years|
|T. Rowe Price Group||TROW||16.05%||4.48%||2.13%||4.27%||5%||23%|
|Automatic Data Processing Inc.||ADP||14.69%||4.23%||2.13%||2.08%||103%||125%|
|NextEra Energy Inc.||NEE||11.59%||4.48%||2.59%||2.03%||121%||147%|
|Air Products and Chemicals Inc.||APD||11.26%||3.85%||2.26%||2.09%||84%||107%|
|Prosperity Bancshares Inc.||PB||8.85%||3.16%||2.07%||2.96%||7%||22%|
|Cullen/Frost Bankers Inc.||CFR||8.83%||3.64%||2.38%||2.58%||41%||62%|
|Atmos Energy Corp.||ATO||8.82%||3.56%||2.33%||2.63%||35%||52%|
|McCormick & Co. Inc.||MKC||8.45%||3.03%||2.02%||1.81%||67%||81%|
|Hanover Insurance Group Inc.||THG||8.45%||3.01%||2.01%||2.34%||29%||52%|
Click on the tickers for more about each company.
Among these 15 Aristocrats, 11 have beaten the S&P 500’s five-year total return.
Looking back at last year’s list
A year ago we ran a similar screen to list the 12 best payout compounders among the S&P 500 Dividend Aristocrats for five years through 2021. (Ten of those stocks also appear on the new list, above.)
Leaving the list in the same order they were presented a year ago, here’s how the 12 Aristocrats listed then fared during 2021, as the S&P 500 declined 19% with dividends reinvested:
|Company||Ticker||2022 total return|
|T. Rowe Price Group||TROW||-42%|
|Illinois Tool Works Inc.||ITW||-8%|
|Automatic Data Processing Inc.||ADP||-1%|
|NextEra Energy Inc.||NEE||-9%|
|Air Products and Chemicals Inc.||APD||4%|
|McCormick & Co. Inc.||MCK||-13%|
|Atmos Energy Corp.||ATO||10%|
Nine of the 12 best compounders among the S&P 500 Dividend Aristocrats for five years through 2021 outperformed the S&P 500 during 2022.