This is the part 1 in the 50 part Dividend Aristocrats in Focus series on The Dividend Aristocrats. What is a Dividend Aristocrat?
Dividend Aristocrats are businesses that meet the following criteria:
– Members of the S&P 500
– 25+ Years of consecutive dividend increases
– Certain minimum size and liquidity requirements
For a business to pay increasing dividends for 25+ consecutive years, it must possess a strong and durable competitive advantage and a shareholder friendly management that emphasizes dividend payments.
“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”
– Warren Buffett
As you might expect, the Dividend Aristocrats Index has outperformed the market by 3.1 percentage points a year over the last decade.
Source: S&P Fact Sheet
Intuitively, it makes sense that businesses with competitive advantages and shareholder friendly managements would outperform the market over long periods of time.
Selecting from Dividend Aristocrats is a ‘short cut’ to investing in high quality dividend growth businesses.
Analyzing every Dividend Aristocrat helps investors know what to look for. Certain patterns emerge when analyzing the best businesses in the world. There’s much to learn from the Dividend Aristocrats in Focus series.
This year’s Dividend Aristocrats in Focus series takes a slightly different approach from prior years. Dividend Aristocrats will be examined in order based on GICS sector.
This way, patterns between Consumer Staples stocks will become apparent as investors read the analysis of all of them in order as opposed to switching from sector to sector.
The number of Dividend Aristocrats in each of the 11 GICS sector is below:
– Consumer Staples – 13
– Industrials – 8
– Health Care – 7
– Consumer Discretionary – 6
– Financials – 5
– Materials – 5
– Energy – 2
– Information Technology – 1
– Real Estate – 1
– Telecommunication Services – 1
– Utilities – 1
The Dividend Aristocrats Index is dominated by the Consumer Staples sector. The Consumer Staples sector is the best sector for long-term sustainable competitive advantages.
On the other end of the spectrum are the Information Technology, Real Estate, Telecommunication, and Utilities Sectors. Each has only 1 constituent in the Dividend Aristocrats Index.
The first sector we will cover is the Utilities Sector.
The sole utility sector Dividend Aristocrat is Consolidated Edison, Inc. (NYSE:ED). This article takes a look at the investment prospects of Consolidated Edison.