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Deep Dive

Philip van Doorn

April 25, 2022, 1:44 p.m. EDT

Dividend Aristocrat stocks can help you keep ahead of inflation. These 15 take top prizes for raising payouts.

By Philip van Doorn

Some investors are interested in stocks that pay high dividend yields for a source of income. Others believe it is better to focus on total returns over long periods. The Dividend Aristocrats are a group of stocks that appeal to both camps.

Below is a list of Dividend Aristocrats that have increased their payouts the most over the past 10 years. The group’s performance has been, in a word, incredible.

Connection between dividends and inflation

MarketWatch’s Mark Hulbert advises investors to pay attention to dividends when inflation is high . He points to data showing that companies in the benchmark S&P 500 Index (S&P:SPX) tend to increase dividends at a higher rate than inflation.

Turning to the S&P 500 Dividend Aristocrats — a group within the benchmark that has increased annual regular dividends for at least 25 years — Hulbert makes the case that this group can be expected to pay dividends matching the yield on 10-year U.S. Treasury notes (XTUP:BX:TMUBMUSD10Y) over the next decade. And that’s on top of the potential for stock market gains when holding a group of blue-chip companies.

The Dividend Aristocrats don’t necessarily provide high income — many have low current dividend yields. The idea is that a commitment by management to increase payouts to owners over time might correlate with better long-term performance.

Best dividend compounders

We decided to highlight Dividend Aristocrats that have raised payouts the most over the past decade. To do this, we expanded our pool beyond those in the S&P 500.

S&P Global maintains a large number of Dividend Aristocrat indexes. You can see the full list  here , and a shorter list of Aristocrat indexes tracked by exchange traded funds  here .

We focused on the three broad groups of Dividend Aristocrats listed on U.S. exchanges:

  • The S&P 500 Dividend Aristocrats Index (S&P:XX:SP50DIV) is made up of the 65 stocks in the S&P 500 that have raised regular dividends on common shares for at least 25 years. It is tracked by the ProShares S&P 500 Dividend Aristocrats ETF (BATS:NOBL) .

  • The S&P 400 Dividend Aristocrats Index has 48 stocks of companies that have raised dividends for at least 15 consecutive years, drawn from the full S&P Mid Cap 400 Index (PSE:MID) . It is tracked by the ProShares S&P MidCap 400 Dividend Aristocrats ETF  (BATS:REGL) .

  • The S&P High Yield Dividend Aristocrats Index (1083:XX:SPHYDA)  is made up of the 119 stocks in the S&P Composite 1500 Index (S&P:XX:SP1500)   SP1500, +1.65%  that have increased dividends for at least 20 straight years. It is tracked by the SPDR S&P Dividend ETF (PSE:SDY) . The S&P Composite 1500 itself is made up of the S&P 500, the S&P Mid Cap 400 and the S&P 600 Small Cap Index (S&P:SML) . So the S&P High Yield Dividend Aristocrats Index includes all the stocks in the S&P 500 Dividend Aristocrats Index. But it excludes some that are in the S&P 400 Dividend Aristocrats Index. The name of the High Yield Dividend Aristocrats Index is confusing, because the yields aren’t necessarily high — they range from 0.19% to 5.08%.

Combining the three Dividend Aristocrat Indexes and removing duplicates gives us a pool of 136 companies.

From that group, here are the 15 companies that have shown the highest compound annual growth rates (CAGR) for regular dividend payouts over the past 10 years. It makes no difference what the current dividend yield may be or what it was 10 years ago:

Company Ticker 10-year dividend CAGR Current dividend yield Dividend yield – 10 years ago Dividend yield on shares purchased 10 years ago Total Return – 10 Years
Cintas Corp. (NAS:CTAS) 21.55% 0.91% 1.38% 9.69% 1119%
A. O. Smith Corp. (NYS:AOS) 21.48% 1.71% 1.44% 10.07% 576%
Lowe’s Companies Inc. (NYS:LOW) 19.04% 1.58% 1.75% 10.00% 657%
Toro Co. (NYS:TTC) 18.49% 1.40% 1.24% 6.77% 448%
Bank OZK (NAS:OZK) 17.85% 2.98% 1.58% 8.14% 241%
Sherwin-Williams Co. (NYS:SHW) 16.53% 0.95% 1.34% 6.17% 616%
Roper Technologies Inc. (NYS:ROP) 16.25% 0.54% 0.57% 2.56% 406%
Nordson Corp. (NAS:NDSN) 15.10% 0.91% 0.95% 3.89% 371%
Fastenal Co. (NAS:FAST) 13.81% 2.19% 1.43% 5.22% 210%
Williams-Sonoma Inc. (NYS:WSM) 13.49% 2.12% 2.31% 8.20% 393%
T. Rowe Price Group (NAS:TROW) 13.44% 3.31% 2.20% 7.77% 221%
Hormel Foods Corp. (NYS:HRL) 13.24% 1.94% 2.12% 7.34% 358%
L3Harris Technologies Inc. (NYS:LHX) 13.00% 1.74% 2.99% 10.13% 625%
Illinois Tool Works Inc. (NYS:ITW) 12.98% 2.40% 2.60% 8.81% 362%
Nike Inc. Class B (NYS:NKE) 12.98% 0.89% 1.31% 4.45% 459%
Source: FactSet

Click on the tickers for more about each company.

You should also read Tomi Kilgore’s detailed guide to the wealth of information for free on the MarketWatch quote page.

Notes about the Dividend Aristocrats that have grown payouts the most over the past 10 years:

  • The Dividend Aristocrat with the highest 10-year dividend growth CAGR was Cintas Corp. (NAS:CTAS) , which also had the best total return for 10 years through April 19, 2022, with dividends reinvested. That return of 1,119% compares to a total return of 295% for the S&P 500. In fact, among this group of 15 best dividend compounders among the Aristocrats, 13 have beaten the S&P 500’s 10-year return.

  • The current yields for the group may be low — 10 are below 2% and five are below 1%. Many also had low yields 10 years ago. But if you look at the second column from the right, you can see how high the yields would have grown on shares held for 10 years. Based on current payouts and prices paid 10 years ago, three of the 15 now yield 10% or more, with nine yielding more than 7% and 12 yielding more than 5%.

All in all, this group of 15 Dividend Aristocrats that have grown their dividends the most over the past 10 years has performed remarkably well. It made no difference how high or low the dividend was. A focus on generous increases of the payouts was correlated with high total returns eventually high income.

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