The S&P 500 Dividend Aristocrats are top dividend stocks that have increased their dividends for 25 consecutive years and are rebalanced annually. They are viewed as solid, stable companies with consistent dividend increases, rather than high-yielding stocks.
The Standard & Poor’s (S&P) 500 Divided Aristocrats are members of a list that includes only the top dividend stocks. To be included in this elite list, a company must meet certain rigorous requirements. First, you must be a member of the S&P 500. As such, the companies named on the Aristocrats Split List are all large-cap stocks. Additionally, all companies making the list must have increased their dividends for each of the previous 25 consecutive years.
These criteria are strictly adhered to, which is what makes the S&P 500 Dividend Aristocrats an income-stock aristocracy list. Being designated a dividend aristocrat indicates a very stable company. Over a 25-year period, the company has weathered recessions or other boom-and-bust irregularities in the stock market and been able to increase returns for its shareholders.
The composition of the S&P 500 dividend aristocrats changes over time. Sometimes it can change dramatically and often, depending on economic upheavals. Each December, the list is rebalanced in an annual review that ensures only the most elite and consistent dividend stocks remain on the list.
In the annual review, any current dividend aristocrat who has been removed from the S&P 500 in the previous year, for whatever reason, is removed from the list. If an existing member decides to freeze her dividend for one year, she will also be delisted. Finally, if a current member of the Dividend Aristocrats list decides to reduce her dividend sometime in the next 12 months after the annual review, she is removed from the list the following December. After being removed from the dividend aristocrat list, a company, no matter how big or important, will have to wait another 25 years before it is eligible to be listed again. Similarly, each member company of the S&P 500 that crosses the threshold of 25 consecutive years of increasing dividends is added to the list each December.
Investors often view dividend aristocrats as a list of solid companies with excellent track records in which to invest. Dividend aristocrats are generally not among the highest-yielding stocks an investor can find. High returns are not a prerequisite for listing. What is most important is stability and longevity to provide consistent dividend increases to shareholders rather than providing the highest return on an investment.
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