When you look at dividend stocks, you often hear terms such as dividend aristocrats, kings, champions or achievers. These are all categories that classify individual companies based on their dividend history. Here you can find out what exactly distinguishes these individual categories from one another and what criteria they are based on.
Dividend Achievers
The list of the so-called Dividend Achievers has the lowest requirements of the lists discussed here in order to be included on it. This list includes companies that have increased their dividend in the last ten or more consecutive years and have simultaneously and are also listed on the New York Stock Exchange (NYSE) or Nasdaq and also meet certain minimum trading volume requirements.
These criteria were first compiled by Moody's Investors Service in 1979. The rights to this list and the name were acquired by Nasdaq in 2012, which continues to operate it today.
The methodology and the individual indices designed on the basis of the Dividend Achievers list can be viewed here: https://www.nasdaq.com/solutions/nasdaq-dividend-achievers
Dividend Aristocrats and Champions
Under Dividend Aristocrats
and champions are generally understood to be companies that have been continuously for 25 years.
The term aristocrats refers to the S&P 500 Dividend Aristocats Index. In addition to the 25-year growth history, two further criteria (i.e. three in total) must be met:
The share must be part of the S&P 500 IndexCertain requirements regarding market capitalization (market capitalization based on free float of at least US$ 3 billion) and liquidity (average trading volume of at least US$ 5 million) must be met.At least 25 consecutive years of dividend increases
An alternative to this is the list of Dividend Champions list. It is not limited to members of the S&P 500 and was first compiled by Dave Fish in 2007. In addition to US companies, it also includes companies from Canada and Europe. This list is a spreadsheet that is updated monthly and can be downloaded here: https://moneyzine.com/investments/dividend-champions/
Dividend Kings
The Dividend Kings is the most exclusive and therefore also the shortest list. It only includes companies that have continuously increased their dividends over the last continuously increased over the last 50 years. years. Only around 48 companies from the S&P 500 are currently members of this exclusive club. There are no dividend kings from Europe.
Does this automatically make all kings aristocrats?
Although Dividend Aristocrats must increase their payout for at least 25 consecutive years, something that also applies to all Dividend Kings, they must also be part of the S&P 500 (i.e. meet minimum market capitalization and liquidity standards). Therefore, smaller dividend kings fall out of the list of aristocrats, even though they may have a much stronger track record in terms of dividend growth. The dividend kings are thus in part a prime example of stability and consistency rather than rapid or massive growth.
The list of champions, on the other hand, includes all kings, as the specific criteria of the S&P 500 do not apply.
Why are such lists compiled at all?
There are numerous metrics and ratios that can be used to evaluate a company. But for income-oriented investors, the ability of a company to pay a continuously increasing dividend is an important indicator of financial strength. At the same time, annual dividend growth encourages long-term investors to buy and hold, which in turn can reduce volatility and reduce the likelihood of a short-term price drop.
This highlights another advantage of dividend stocks: once a company has started paying a dividend, it will usually continue to prioritize it in the future. Dividend kings take this commitment to the next level by increasing the payout to shareholders each year and doing so for longer than many investors are alive.
My thoughts on these lists
As you may have noticed, all of the lists presented here are based on the past. This means that past (value) developments are no guarantee for the future. However, a long history of positive dividend growth indicates a higher probability that this will be maintained in the future.
At this point, it should also be noted that neither the dividend history nor the amount of the distribution or the payment frequency should be seen as the sole reason to buy. As always, it is important to get an overall picture and to find out about the company in all other respects. Nevertheless, the lists mentioned here provide a good starting point for researching new high-dividend companies for your own portfolio.
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