Get Rich with Dividends
What Is A Perpetual Dividend Raiser?
Typically, a company with an established trend of increasing its dividends will raise them again next year, and the year after unless it becomes impossible to do so.
Lists of dividend raisers:
- Dividend Aristocrats
- Dividend Champions
- Dividend Achievers
- Dividend Contenders
- Dividend Challengers
The bluest of the blue chips. Roughly 50 stocks qualify in a given year.
Four criteria of a dividend aristocrat:
- Be a member of the S&P 500 index
- Have increased its dividend every year for at least 25 years in a row
- Have a market capitalization of at least $3 billion
- Trade a daily average of at least $5 million worth of stock for the prior 6 months
Example stock referenced: Genuine Parts Co. (NYSE: GPC)
At the time of publication, GPC has increased its dividend every year since 1956.
Four companies were added to the Dividend Aristocrats Index in 2013 and one was removed:
- AbbVie Inc (NYSE: ABBV)
- Cardinal Health (NYSE: CAH)
- Chevron Corporation (NYSE: CVX)
- Pentair (NYSE: PNR) [has since been removed]
- Removed: Pitney Bowes (NYSE: PBI)
- At the time of publication, the only fund that tracked the dividend aristocrats index was the ProShares ETF (NASDAQ: NOBL)
- SPDR S&P Dividend ETF (NYSE: SDY) tracks the high yield S&P high yield aristocrats index, consisting of the 60 highest yielding members of the S&P Composite 1500.
The author did not recommend investing in these funds at the time of writing . Because there is no guarantee the fund will replicate the performance of the index or whether the dividend will consistently increase.
In many cases, you can find higher yields in individual stocks compared to ETFs.
Note, just because a company is on the aristocrat list does not mean it has an attractive dividend yield. This is obviously dependent on the purchase price of the stock.
Example: Sherwin-Williams (NYSE: SHW) has raised its dividend for 42 consecutive years but only yields 1% (depending on purchase price).
The Dividend Investing Resource Center maintains a list called the Dividend Champions, you can download the latest version in excel or PDF formats here. The list is updated monthly.
Champions are also companies that have raised their dividends for 25 years, but are not a part of the S&P 500 and have no liquidity or other restrictions.
- Challenger: Tompkins Financial Corporation (NYSE: TMP) has a market cap of $800M and an average trading volume of 50,000.
- Aristocrat: Kimberly-Clark Corporation (NYSE: KMB) has a market cap of $46B and an average trading volume of 2.4M.
The champions list includes all of the aristocrats and typically has twice as many stocks as the aristocrats.
Some stocks on the champions list offer benefits to individual investors that may not be attainable by professional money managers.
- Some companies are small, so an institutional investor would not be able to buy stock without moving the price considerably.
- The manager might have a tough time selling the stock because of liquidity issues.
- Example: California Water Service Group (NYSE: CWT), trades fewer than 140,000 shares per day.
An individual has more flexibility than the money manager with millions to invest.
Dividend Achievers (think of them as Junior Aristocrats):
- Stocks that have raised their dividend for 10-24 consecutive years
- Meet some easy liquidity requirements
- The list is maintained by Nasdaq OMX
- Vanguard Dividend Appreciation Index Fund ETF (NYSE: VIG), tracks the Nasdaq US Dividend Achievers select index.
- Invesco Dividend Achievers ETF (NYSE: PFM), tracks the broad Dividend Achievers index. [This was formerly Proshares but is now Invesco.]
- Invesco High Yield Equity Dividend Achievers ETF (NYSE: PEY), corresponds to the Nasdaq Dividend Achievers 50 index. [This was formerly Proshares but is now Invesco].
- The achievers 50 index consists of the top 50 highest yielding stocks that have raised their dividends for at least 10 straight years. These stocks must also trade a minimum of $500,000 per day in November and December before the list is reconstituted.
An important difference between the dividend achievers index and the broad dividend achievers index is that the broad index can include REITs and MLPs. They are discussed more in the upcoming sections.
Dividend Contenders (think of them as Junior Champions):
The Dividend Investing Resource Center maintains a list called the Dividend Contenders, you can download the latest version in excel or PDF formats here. The list is updated monthly.
The only qualification is to have raised the dividend for 10-24 consecutive years.
The list is also updated monthly at The Dividend Investing Resource Center.
The only qualification is to have raised the dividend for 5-9 consecutive years.
Yield Figures as of Aug 2014:
- The average yield of a champion is 2.64%
- The average yield of a contender is 2.76%
- The average yield of a challenger is 3%
Example: Atmos Energy Corporation (NYSE: ATO) has raised its dividend for 26 consecutive years.
Challenger Example: Columbia Sportswear Company (NASDAQ: COLM) has raised its dividend for 9 consecutive years. Challengers tend to lift their dividends at a faster pace than champions and contenders.
Remember that the companies we are examining are ones that have never been cut from the list.
Example:F.N.B. Corporation (NYSE: FNB) has a 35-year history of raising its dividend until 2009. In February 2009 it cut its dividend in half.