Dividend Aristocrats for further research

In order to be successful, you need to identify your goals and objectives and have a strategy to reach them. This strategy should break down your actions towards those goals into small, measurable inputs.

With my strategy, I try to buy good companies that sell at good valuations. Then I hold. I invest regularly, and buy future dividend income through this action. I keep stacking income producing assets, and reinvest in the accumulation phase. I do this until the coveted dividend crossover point, which is when dividend income covers expenses.

I identify good companies by creating and maintaining a population of such enterprises. One can either build it directly, one company at a time OR they can start using lists of existing companies that already meet certain criteria. Mixing and matching both methods is a good way to keep your bases covered as well.

One of my favorite lists to start off on my research is the list of Dividend Aristocrats. Dividend Aristocrats are S&P 500 companies that have managed to increase dividends for at least 25 years in a row.

This is not a small achievement.

A long track record of annual dividend increases is the end result of being a quality company with competitive advantages. Such companies have not only managed to grow for decades, but also managed to generate excess cashflows to distribute to shareholders, through recessions, wars, inflation, and other changes in the economy.

Of course, competitive advantages may not last forever. But, the dividend aristocrats list is definitely a good starting point for further research.

I recently obtained the list of dividend aristocrats for 2024.

I then decided to narrow it down to a list of companies for further research, and potential addition to my portfolio.

I reviewed the trend in earnings per share over the past decade for each company. I want companies that can continue raising the dividend. I believe that without growth in earnings per share, you cannot go dividends in the future.

Next, I reviewed the rate of the last dividend increase. Dividend increases have signaling power. Management teams tend to evaluate business needs, the competitive environment, and near term economic conditions, in order to determine how much excess cashflows they can distribute to shareholders in the form of dividends. A slowdown in dividend increases is generally a near term negative signal that shows management is not very optimistic about the company’s ability to grow.

As a result of this exercise, I ended up with a list of 17 Dividend Aristocrats for further research on my end. These companies are not automatic buys for me of course. Even the best company in the world is worth wildly overpaying for in my opinion. That’s because overpaying for future promises could result in sub-par investment returns, even if fundamentals end up delivering as expected.

You can view the list below. It includes company symbol, name, sector, years of annual dividend increases, 10 year annualized dividend growth, dividend yield, forward P/E and how much $$$ the DGI Portfolio Newsletter owned as of January 31, 2024.