Takeaways
- Dividend aristocrats have increased their dividends for at least 25 years.
- Dividend-paying stocks can add a passive income strategy to your portfolio.
- Members of the dividend aristocrats are part of the S&P 500.
- Dividend aristocrats have steady cash flows to help support their dividends.
- Steady growth and dividends are cornerstones of dividend aristocrats.
The favorite time of the year for passive income lovers is when their dividends are declared. Dividend investing aficionados relish this time because it is when they get rewarded for being shareholders of dividend-paying companies. A select group of companies stands out among the competition. They are known as the dividend aristocrats.
Investing in companies that pay dividends to shareholders is a great way to build wealth and increase your net worth. Let's explore how dividend aristocrats dominate the dividend investing landscape.
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What Are Dividend Aristocrats?
Dividend aristocrats are a group of companies within the S&P 500 that have consistently increased their dividend payments for at least the last 25 years.
Investors flock to dividend aristocrats because they understand that reaching the point of paying recurring dividends to shareholders is a major milestone in a company's lifecycle. When companies reach this point, they are very stable, mature, and producing significant cash flow. And they want to reward their investors.
In addition to paying their investors, they have consistently increased their dividends each year for 25 years. Through economic booms and busts, these companies have continuously rewarded their shareholders. Investors looking for the stability of dividend income and time-tested durability turn to dividend aristocrats.
Examples of Dividend Aristocrats
Investors and analysts have categorized dividend aristocrats in various ways, including by sector, market capitalization, and growth.
There are over 65 dividend aristocrats in the S&P 500 today. Here is a sample of ten companies currently listed as dividend aristocrats:
- AbbVie
- Aflac
- Caterpillar
- Chubb
- Coca-Cola
- Exxon Mobile
- Lowe's
- Procter & Gamble
- T. Rowe Price
- Sysco
If you don't want to invest in individual stocks, you can invest in the S&P 500 Dividend Aristocrats Index.[1] (Read more about Index Investing)
Advantages of Dividend Aristocrats
- Regular Income: Investors buy dividend-paying stocks for several reasons, including investing in stable and mature companies and building a steady income stream. If you are nearing retirement or are a younger investor looking to increase your income, you can create a reliable passive income stream by investing in dividend aristocrats.
Related: 9 Best Ways to Earn Passive Income in 2025
- Increasing Payments: One unique feature of dividend aristocrats is that they have increased dividend payments for over 25 years. As investors rely on passive income, dividend aristocrats can act as a hedge against inflation. Other stocks, known as dividend kings, also pay consistent dividends, but they do not have to be part of the S&P 500 index.
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Disadvantages of Dividend Aristocrats
- Taxable Income: Not all investments produce the same amount of taxable income. Investments can yield capital gains taxes that are either taxed as short-term or long-term capital gains.
Additionally, investments that pay dividends are classified as ordinary or qualifying dividends, depending on when you purchase the stock. Taxes on dividend income can affect your total return. (Read about the 7 Steps to File Your Taxes).
- Lack of Growth: Investors trade steady income streams for lack of growth when they invest in dividend aristocrats. Growth companies, such as early-stage startup companies, are focused on reinvesting their earnings into the future growth of the company through investing in new technology, projects, or other verticals that increase the revenue and profitability of the company.
As an investor in dividend aristocrats, you understand that your investment might not grow as quickly as another investment but gladly trade that opportunity for more consistent returns.
Smart Summary
Dividend aristocrats can be great additions to any equity portfolio looking for steady investments that produce reliable income streams. As established and mature companies, dividend aristocrats are well-positioned to weather volatile markets and can make instrumental investments for retirement portfolios.
You can use your online stock brokerage account to research which dividend aristocrats are best for your portfolio. Depending on your portfolio needs, you could invest in individual dividend-aristocrat companies or single dividend-aristocrat exchange-traded funds (ETFs).
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(1) S&P 500. S&P 500 Dividend Aristocrats Index. Last Accessed February 21, 2025.
