WHAT ARE WE LOOKING FOR? Let's take another look at dividend aristocrats, companies that raise dividends for many years in a row. Today we'll look at the S&P 500 dividend aristocrats index.
MORE ABOUT TODAY'S SCREEN The Canadian dividend aristocrats must raise dividends for five years straight to qualify for the index, but the S&P 500 version requires 25 years.
It is an equal weight index, with weightings equalized each quarter. Membership is reviewed every December and members must have a float-adjusted market capitalization of $3-billion (U.S.).
WHAT DID WE FIND OUT? A lot of classic blue-chip names offer decent yields of more than 3 per cent and the likely comfort of rising dividends. Names like Coca-Cola and McDonald's fall into this camp. That said, the number of names on this list has fallen to 43 from 60 in 2007. (Visit tgam.ca/cruncher for the full list.)
Sorting through this list to do more research on good individual dividend stocks is probably a worthwhile task, but it's hard to say if investing in dividend aristocrats is a good long-term strategy.
On S&P's website, it mentions that the dividend aristocrats have lost 1.07 per cent over the past three years versus a loss of 3.62 per cent for the S&P equal weight index. But over seven years, the aristocrats have returned 7.92 per cent, versus 9.16 per cent for the equal weight index. The annualized dividend of the aristocrats is 2.9 per cent, versus 1.66 per cent for the equal weight index.