A Decade of Aristocrats

Written by Robert Hodges

Published on January 04, 2020

As the decade closes, we at PTI thought it would be a good idea to review the decade in terms of the Dividend Aristocrats, and how well they have performed over the past 10 years.  We are doing this to demonstrate how well a portfolio can do with no other consideration except that they are in the S&P 500 and have raised their dividend each and every year for 25 years in a row or more.  So, we looked to see which stocks qualified as Dividend Champions at the beginning of 2010, which stocks qualified to join the list over the next decade, and which were removed over that time due to a dividend cut, freeze, or merger.  We assumed an investment of $10,000 in each stock and calculated the value of each position at the end of the decade (as of 12/26/19) or when the stock was removed from the portfolio.  Here are the results.

Aristocrats on 1/2/2010:

This is the list of stocks that were Dividend Aristocrats at the beginning of the decade.  These would have been bought on 1/2/2010.

For our study portfolio $10,000 would have been put into each of these positions.

As the decade went on the following changes occurred to the list.  As new stocks were added to the Dividend Aristocrats list, $10,000 of each would have been bought and added to the portfolio.

2011:

  • Century Link sold due to a merger with Qwest, and a freezing of the dividend.
  • AT&T (T) added to the list and bought
  • Colgate-Palmolive (CL) added to the list and bought
  • Franklin Resources (BEN) added to the list and bought
  • Genuine Parts (GPC) added to the list and bought
  • HCP, Inc (HCP) added to the list and bought
  • Illinois Tool Works (ITW) added to the list and bought
  • Medtronic (MDT) added to the list and bought
  • Nucor Corp (NUE) added to the list and bought
  • Sysco Corp (SYY) added to the list and bought
  • Rowe Price (TROW) added to the list and bought

2012:

  • Pitney Bowes sold due to a dividend cut

2013:

  • Bemis sold due to a merger with Amcor
  • Abbvie, Inc (ABBV) added to the list and bought
  • Cardinal health (CAH) added to the list and bought
  • Chevron Corp (CVX) added to the list and bought
  • Pentair Plc (PNR) added to the list and bought

2014:

  • Sigma-Aldrich Sold due to a merger with Merck
  • Family Dollar sold due to merger with Dollar Tree

2016:

  • HCP, Inc sold due to a dividend cut

2017:

  • Bard, CR sold due to merger with Becton, Dickinson & Co
  • Federal Realty Investment Trust (FRT) added to the list and bought
  • General Dynamics (GD) added to the list and bought

2018:

  • O. Smith (AOS) added to the list and bought
  • Praxair (PX) added to the list, and then bought by Linde (LIN). LIN was then added to the list.
  • Roper Technologies (ROP) added to the list and bought

2019:

  • Caterpillar (CAT) added to the list and bought
  • United Technologies (UTX) added to the list and bought

Things to note:

  • Out of the 64 stocks which have been on the list during the decade, only two cut their dividend, and one froze its dividend. This shows how stable the list is, and how reliable they are in terms of increasing their dividends year after year.
  • There were more stocks that were bought out in mergers (5) than there were stocks who cut or froze their dividend (3).
  • Only 4 of the stocks had negative returns during the decade, and only one of the original 43.

Results:

A total of $640,000 would have been used to buy all the positions opened during the decade.  As of 12/26/19 that $640,000 would have turned into $2,190,631.  This is an annual return of 16.88%.  The market, on the other hand, during this time (as represented by SPY) had an annual return of 14.78%, and at the end of the decade would have been worth $1,872,685.

Discussion:

This study of the Dividend Aristocrats stocks over the past decade shows, once again, how powerful dividend growth can be.  This portfolio was produced with no consideration of earnings, PE ratio, momentum, analyst recommendations, or any of the other issues investors take into consideration when deciding which stocks to buy.  Not even how fast the dividend was growing.  Simply buying large cap stocks (stocks in the S&P 500), which have an unbroken streak of growing their dividend for at least 25 years or more, beat the stock market by more than two percentage points per year over the ten year period, and produced over $300,000 more in value.

This is a clear demonstration of why we at PTI use the Dividend Aristocrats as the starting point for many of our portfolios.

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