Information about investing in S&P 500 dividend aristocrats

S&P 500 dividend aristocrats

As the implications of the COVID-19 pandemic has had a negative impact on many companies globally, some companies may already have or will cut dividends this year. Companies typically cut dividends as a way to conserve capital, which can be necessary especially during economic downturns. Within the S&P 500, 12 companies have cut or reduced dividend payments as of the 30th of March 2020. While some have cut dividends, a group of companies within the S&P 500, known as dividend aristocrats, are expected to increase payments as they have for at least the past 25 consecutive years.

Dividend aristocrats

In 2005, the parent company of the S&P 500 index, S&P Dow Jones Indices, launched an index that tracks S&P 500 constituents that have increased dividend payments for 25 consecutive years. The index is called the S&P 500 Dividend Aristocrats and thus, companies within this benchmark are referred to as dividend aristocrats. As of the 3rd of April 2020, there are 66 companies included in the S&P 500 Dividend Aristocrats Index.

Dividend aristocrat criteria

The S&P Dow Jones Indices have laid out certain criteria for a company to be considered a dividend aristocrat and included in its corresponding index. The four requirements are:

  • Be a constituent in the S&P 500 index
  • Have increased total dividend per share amount for a minimum of 25 consecutive years
  • Have a float-adjusted market capitalisation of at least $3 billion
  • Have an average daily value traded of at least $5 million for three-months before the rebalancing reference date

Top traded dividend aristocrats via DEGIRO

Out of the companies within the S&P 500 Dividend Aristocrats, the five top traded via DEGIRO are:

The most traded dividend aristocrats via DEGIRO are Coca-Cola, ExxonMobil, AT&T, 3M and Johnson & Johnson.

The Coca-Cola Company

The top traded dividend aristocrat is a company that you are likely familiar with, Coca-Cola. It is the largest non-alcoholic beverage company and has more than 500 brands in 200 countries and territories. Some of its well-known brands include Sprite, Schweppes and Costa. Coca-Cola is a recognised dividend stock as it has increased dividends for 58 consecutive years.

Coca-Cola released its Q1 2020 results in April and reported a 1% decrease in revenue from the same quarter year-over-year (YoY). While that might not seem too bad considering the impacts of COVID-19, the company expects to see a more significant impact on revenues in the second quarter. ‘Away-from-home’ channels, such as restaurants and bars, represent around half of the company’s revenues under normal circumstances. In April, Coca-Cola said that it had experienced a global volume decline of approximately 25%, most of which coming from away-from-home channels. However, Coca-Cola is optimistic about the second half of 2020.


ExxonMobil Corporation

The second most traded divided aristocrat is ExxonMobil. ExxonMobil is an energy and chemical-producing giant and is one of the biggest oil companies in the world. The company operates under four brands: Esso, Exxon, Mobil and ExxonMobil Chemical.

Similar to Coca-Cola, ExxonMobil has a long dividend history, increasing payment amounts for the past 37 years. While ExxonMobil has said it will reduce capital spending by 30% for 2020 with oil prices and demand down amid the coronavirus, CEO Darren Woods said that the company is committed to maintain its dividend.


AT&T Inc.

Coming in third is AT&T, the world’s largest communications company in terms of revenues. It operates in four business segments: AT&T Communications, WarnerMedia, AT&T Latin America and Xandr. Even with the uncertainties surrounding the coronavirus, AT&T has also said that it is committed to its dividend and has increased it for the past 35 years.

Like most companies, AT&T has had to make adjustments in response to the implications of the coronavirus. For example, the company cancelled its $4 billion accelerated-share-repurchase plan and adjusted its capital allocation. AT&T said that by doing this, it will be able to continue investing in growth areas including 5G, broadband and its upcoming streaming platform HBO Max.


3M Company

Forth on our list is 3M. The company has a long dividend history as it has increased payments for 62 consecutive years. 3M manufactures industrial, safety and consumer products. It makes everything from adhesive tapes to dental tools. Some of its brands include Post-it, Scotch and Command.

3M’s sales were up 2.8% in Q1 2020 YoY. This is partly attributed to the increase in demand for personal safety products during this period. It has been a key player so far in producing materials and equipment necessary to combat COVID-19, including respirators and N95 masks. Given the diversity of 3M’s businesses and products, the financial impact of COVID-19 has had varying affects on different parts of its portfolio.


Johnson & Johnson

Last but not least is Johnson & Johnson, which has increased dividend payments for 58 consecutive years. The company produces medical devices and pharmaceutical and consumer packaged goods. Brands such as Neutrogena, Tylenol and Listerine fall under its umbrella.

Like 3M, Johnson & Johnson also experienced positive growth in sales during the first quarter with a 3.3% increase YoY. The company’s Pharmaceutical and Consumer Healthcare divisions, in particular, helped to bolster sales. Alongside many others, Johnson & Johnson is making efforts to fight the coronavirus. At the end of March 2020, it announced a lead COVID-19 vaccine candidate together with the Biomedical Advanced Research and Development Authority (BARDA). If human trials go as planned in September 2020, Johnson & Johnson has plans to produce between 600 and 900 million doses of the vaccine by the end of Q1 2021.

Investing through DEGIRO

Is investing in dividend stocks a part of your investment strategy? Are you interested in investing in a dividend aristocrat? There are also a number of ETFs available on the platform that track dividend aristocrats. The fee to invest in these ETFs can be found here.

If a product you hold pays a dividend and DEGIRO is notified about it accordingly, it is shown in your portfolio under the ‘Upcoming dividends’ section. After it is paid, the listing will be removed from that section and paid into your cash account. A record of this can be found on your account statement under the ‘Activity’ tab. Once a dividend is paid, it can be withdrawn, reinvested or left in the cash account. Please be aware that we do not offer automatic dividend reinvestment.

Dividend aristocrats have a history of paying and increasing dividend payments, but dividend payments are not guaranteed. Companies can choose to suspend, reduce or eliminate dividend payments.

The information in this article is not written for advisory purposes, nor does it intend to recommend any investments. Please be aware that facts may have changed since the article was originally written. Investing involves risks. You can lose (a part of) your deposit. We advise you to only invest in financial products that match your knowledge and experience.

Sources: Bloomberg, S&P Dow Jones Indices, Investopedia, Motley Fool, Coca-Cola, Forbes, AT&T, 3M, Johnson & Johnson, ExxonMobil


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