If you’re thinking about investing in dividend stocks, then you’ll definitely want to get to know the dividend aristocrats. This complete guide covers the essential things you need to know about these special stocks.
What are dividend aristocrats?
Dividend aristocrats are a subset of S&P 500 companies that have increased their dividend payments for 25 consecutive years or more. As you can imagine, these are some of the most stable and well-established companies in the world.
There are currently only 65 companies that qualify as dividend aristocrats. But just because there aren’t many dividend aristocrats in 2022 doesn’t mean they’re not worth investing in. In fact, dividend aristocrats have outperformed the broader market by a wide margin over the long term. In addition to being stable companies, they are often considered some of the safest and most reliable investments on the market.
Why invest in dividend aristocrats?
There are many reasons why investors choose to put their money into dividend aristocrats. For one, they offer a high degree of safety and stability. These companies have proven themselves over time, weathering all sorts of economic conditions. They’re also typically large, well-established businesses with strong balance sheets.
The income generated by this investment is another reason that attracts investors. These stocks tend to pay out high dividends, which can provide a valuable source of income for investors. And because they’ve increased their dividends for 25 years or more, there’s a good chance they’ll continue to do so in the future.
Finally, dividend aristocrats tend to outperform the market over time. This is due in part to their safety and stability, but also because investors are willing to pay a premium for these stocks. As a result, they often offer better returns than the overall market.
Key benefits of investing in dividend aristocrats
One of the biggest benefits of investing in dividend aristocrats is that you can generate a consistent stream of income. These are companies that have proven their ability to increase their dividend payments year after year, even during tough economic times. That means you can count on them to continue paying out dividends even if the market takes a turn for the worse.
Another benefit is that dividend aristocrats tend to be less volatile than the broader market. That’s because they’re typically large, well-established companies with diverse businesses. They’re not as reliant on the overall health of the stock market to perform well.
Finally, dividend aristocrats offer investors a chance to participate in the growth of some of the world’s most successful companies. These are companies that have a proven track record of generating shareholder value over the long term.
Best ways to invest in dividend aristocrats
One of the simplest ways to invest in dividend aristocrats is to buy an ETF that tracks the group. The two most popular options are the SPDR S&P Dividend Aristocrats ETF (SDY) and the iShares Select Dividend ETF (DVY). Both ETFs offer exposure to a basket of dividend aristocrat stocks and can be bought and sold just like any other stock.
Another option is to invest in individual dividend aristocrat stocks. This offers investors more control over their portfolios, but it also comes with more risk. That’s because you’re putting all your eggs in one basket. If the stock of a single company goes down, your entire investment could be at risk.
Before investing in any dividend aristocrat stock, make sure to do your homework. Look at the company’s financials and see if it’s a good long-term investment. Also, take a look at its dividend history to make sure it has a track record of consistently increasing its payments.
How can you start investing in dividend aristocrats?
The first step is finding one that fits your investment goals and risk tolerance. There are dozens of dividend aristocrats to choose from, so it’s important to do your research before making a decision.
Once you’ve found a stock that interests you, the next step is to start buying shares. You can do this through a brokerage account or by investing in a mutual fund or exchange-traded fund (ETF) that focuses on dividend aristocrats.
No matter how you choose to invest, remember to keep diversified and only invest what you’re comfortable losing. Dividend aristocrats can be an excellent addition to any portfolio, but they’re not without risk. By following these steps, you’ll be well on your way to successful investing in dividend aristocrats.
Now that the basics of investing in dividend aristocrats have been covered, let’s take a closer look at some of the best stocks to buy. Here are a few excellent picks:
- Johnson & Johnson (NYSE: JNJ)
- Procter & Gamble (NYSE: PG)
- Exxon Mobil (NYSE: XOM)
- AT&T (NYSE: T)
- Consolidated Edison (NYSE: ED)
These are just a few examples of great dividend aristocrat stocks to buy. For more ideas, be sure to check out up-to-date lists of the best dividend aristocrat ETFs online.
By following these tips, your prospects are clear in terms of generating a consistent stream of income from dividend aristocrat stocks. With these resources in hand, you’ll be well on your way to becoming a successful dividend investor.
