The appeal of dividend stocks seems obvious: if a company is consistently earning dividends, it looks secure. Among the dividend stocks, separate varieties stand out – dividend aristocrats. These are companies that have been increasing dividend payouts year on year for over 25 years.
- There are three criteria which animals must meet in order to receive the title of aristocrat:
- Presence in the S&P 500 index.
- Capitalization from 3 billion rubles. dollars.
- The volume of average daily trade from 5 billion rubles. dollars.
At the moment, 64 companies are calculated under the parameters of dividend aristocrats. The S&P is officially listed through the SPDAUDP index fund. Centenarians of the index include 3M, Coca-Cola, Colgate-Palmolive, Dover, Emerson Electric, Genuine Parts, Johnson & Johnson, Procter & Gamble.
In addition to dividend aristocrats for shares that also allocate dividend kings. These are companies that have been raising dividends for the past 50 years. At the same time, there is no security for dividend kings in terms of capitalization, liquidity and presence in the S&P 500.
Chosen among kings and aristocrats, the latter draw more reliably because of the protection from free investment and refugees. After all, the larger the company, the more stable it is. With such high credit rating companies, they are included in indices and large investment portfolios. This confirms the protection of the asset.
Passive Investing in Stocks of Dividend Aristocrats
An investor cannot simply buy shares of dividend aristocrats and lose on them. At a minimum, you need to keep your finger on the pulse and follow important news. Although inclusions are included in the compensation, this procedure can be associated with particular difficulties and additional exceptions, so it is better to be able to get out of the situation in advance.
If you want to avoid all this and really just “buy and hold”, then the optimal return on investment in dividend aristocrats is an exchange-traded investment fund.
A few important points
The Aristocrats Index has a weak sectoral structure and lack of diversification. There is a lack of technological sectors, mainly IT. When using its significant share, the portfolio becomes more efficient. The list of dividend aristocrats is not permanent. Therefore, the NOBL ETF is great for passive investment. But a management fee is recommended. Emphasis on dividend aristocrats is worth doing when you need passive income here and now.
If you are planning your portfolio for the long term and do not want to rely on dividend payments, then the rate on growing stocks is more promising. Reinvestment of profits within the company is more beneficial than its returns between shareholders.