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% |
Source: FactSet |
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% |
AbbVie Inc. | ABBV | 15.82% | 5.86% | 2.81% | 3.55% | 65% | 108% |
Williams-Sonoma Inc. | WSM | 14.87% | 5.85% | 2.93% | 2.52% | 132% | 163% |
Automatic Data Processing Inc. | ADP | 14.69% | 4.23% | 2.13% | 2.08% | 103% | 125% |
Fastenal Co. | FAST | 14.14% | 4.52% | 2.33% | 2.60% | 73% | 98% |
Aflac Inc. | AFL | 13.30% | 3.74% | 2.01% | 2.28% | 65% | 86% |
Target Corp. | TGT | 11.74% | 6.49% | 3.73% | 2.70% | 141% | 171% |
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% |
McDonald’s Corp. | MCD | 8.52% | 3.49% | 2.32% | 2.26% | 55% | 74% |
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% |
Source: FactSet |
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 |
AbbVie Inc. | ABBV | 24% |
T. Rowe Price Group | TROW | -42% |
Illinois Tool Works Inc. | ITW | -8% |
Aflac Inc. | AFL | 26% |
Automatic Data Processing Inc. | ADP | -1% |
Abbott Laboratories | ABT | -21% |
NextEra Energy Inc. | NEE | -9% |
Air Products and Chemicals Inc. | APD | 4% |
McCormick & Co. Inc. | MCK | -13% |
Atmos Energy Corp. | ATO | 10% |
Target Corp. | TGT | -34% |
McDonald’s Corp. | MCD | 1% |
Source: FactSet |
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.
Photo by Morgan Housel on Unsplash