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Dividend Aristocrats are OVERRATED! Check Out This Dividend Kings List!

Chances are that you have heard of Dividend Aristocrats before and chances are that you have been told that they are the bees’ knees.  Well, maybe they are, but if you want to know what the bees’ brain, arms, legs and feet are, check out this Dividend Kings List!

First off, what even are Dividend Aristocrats?

Dividend Aristocrats are essentially the mecca of dividend paying stocks.  To qualify to be a Dividend Aristocrat, you have to meet a few different criteria:

  • Be in the S&P 500
  • Have 25 consecutive years of increasing dividend payments
    • Note that this is the total dividend paid in dollars, not the dividend yield
  • Have a minimum market cap of $3 billion

That’s it!  Essentially, you have to be a large, steady company, that absolutely crushes the dividend game.  Currently, there are 65 companies that meet these requirements and for that they are deemed the title of being a Dividend Aristocrat!

Being a Dividend Aristocrat is a big deal!  People that are attracted to dividend paying stocks will really key in on those stocks and look at them as an extra source of security.  They know that those companies will do all things possible to try to preserve their dividend before cutting it and that if the company does cut their dividend, it could be a major red flag of trouble ahead.

Honestly, I am more of a fan of trying to find the Dividend Aristocrats of the Future because I want to be able to capitalize on them now and get in at the “ground floor” per se, before they get that big name of being a Dividend Aristocrat. 

To me, it’s almost like investing in real estate.  Would you rather buy in an area that is up and coming or buy in an area that’s already the place to be? 

Personally, I’d want to buy in the area that is up and coming!

If I do that, people will flock to this new area meaning that my investment will be worth more when I sell it, just as a stock would, and also my monthly rent from my tenant will continue to increase year on year because demand is so high, just as a stock’s dividend would! 

But that’s why I say Dividend Aristocrats are overrated – not because they actually are, but because I like to find them before they reach this prestigious status!

But, there’s actually an even more prestigious group of dividend companies, known as Dividend Kings!

To qualify as a Dividend King, you have to meet the same requirements of being a member of the S&P 500 and a $3 billion market cap as a minimum, but then you also have to have a 50-year track record of increasing annual dividend payments!

50 years! WOW!  Have you been investing for 50 years?  Have you even BEEN ALIVE for 50 years?  Both of those are a hard no for me.

The list is made up of some of the age-old companies that you know to be great dividend paying companies such as Procter & Gamble, 3M, Johnson & Johnson, Coca-Cola and Hormel, but there are actually 29 total companies that make up this list!  

A couple companies really surprised me, such as Lowe’s and Target as I didn’t know that they had such a strong history of dividend payments, but you can get the entire list at Marketbeat here.

You might think that the dividend Yield of the Dividend Kings would be something outrageous, but it really isn’t. The dividend yield for SPDR, an ETF that is meant to mimic the returns of the S&P 500, has a dividend yield of 1.72%, and the Dividend Kings are at 2.61% on average and a median yield of 2.12%.

While that return is almost 1% higher, and 1% can have a huge impact on your returns, it still might seem low.  I know it did to me when I first was looking at Dividend Kings, at least.

Buy you know what – higher dividend yield doesn’t actually mean that it’s a better company, and in many times, it could be the exact opposite.  You see, dividend yield is simply the dividend/earnings, so if earnings are cut in half and the dividend stays the same, then the yield would double. 

So, is it a good thing if the company’s earnings cut in half?  Absolutely not!  It’s a major red flag that you need to figure out what the heck is going on with the company.  Personally, I would be terrified that the company might not be able to support that high dividend if something fundamentally changed to the company.

Unfortunately, there are a ton of great dividend ETFs but I wasn’t able to find one for the Dividend Kings.  Good news for you is that you could theoretically create your own, however, simply by buying a small portion of each of the 29 companies and then just getting setup to DRIP those dividends!

I wouldn’t recommend doing this, because that’s a lot of stocks to analyze and hold, but you could do it, and you wouldn’t have to pay any fees on the multiple transactions so that would certainly be beneficial.

Instead, if I were you, maybe use a stock screener to take a look at some of these companies that are great dividend payers but also look poised for massive growth in the future.  You can even put them through the ringer of using the Value Trap Indicator which I think is one of the best tools to help you find an undervalued stock.

But, my #1 recommendation, would be to try to find the Dividend Kings of the Future!  Just as I have talked about how I like to target the Dividend Aristocrats of the Future; I think that you could do the same thing with Dividend Kings.

The key is to get in early.  Look for a company that isn’t even a Dividend Aristocrat yet but is showing a strong track record and then latch on!  Ride your wagon with that company, as long as they continue to perform well, and then you’ll eventually have a Dividend Aristocrat and then even a Dividend King!

Totally lost?  Don’t worry – I’m here to help you with the process!