Investing for income can be a lucrative venture, especially for those who practice patience and choose the right dividend stocks. While these stocks may initially have modest yields, their regular dividend increases can lead to impressive returns in the long run. Companies that consistently raise their payouts demonstrate financial resilience and a commitment to shareholders, making them a reliable choice for investors.
According to David Park and David Chalupnik, portfolio manager and head of U.S. active equities portfolio management at Nuveen, investing in companies with sustainable dividend growth can enhance total returns, reduce volatility, and provide a growing income stream. Dividend growers not only perform well in bull markets but also tend to hold up better during market downturns.
If you’re interested in adding dependable dividend growers to your portfolio, the S&P 500 Dividend Aristocrats is an excellent place to start. This index comprises 67 companies from the S&P 500 that have raised their dividends annually for at least 25 consecutive years. These companies come from various sectors but all share a commitment to reliable and long-term dividend growth.
It’s worth noting that the Dividend Aristocrats index experienced some changes in January 2024. Walgreens Boots Alliance (WBA) was removed from the index after it slashed its dividend by almost half in late 2023, ending its nearly half-century streak of annual dividend increases. On the other hand, industrials supplier Fastenal (FAST) was added to the Dividend Aristocrats due to its consistent quarter-century streak of annual dividend hikes.
Other changes to the Dividend Aristocrats index over the past year include the removal of VF Corp. (VFC) and the addition of Kenvue (KVUE), which was spun off from fellow Aristocrat Johnson & Johnson (JNJ).
Over the past few decades, the Dividend Aristocrats have proven to be among the best dividend stocks for income growth. They offer stability and long-term potential, making them an attractive choice for investors looking to add dividend battleships to their portfolios.
Investors can gain exposure to every stock in the S&P 500 Dividend Aristocrats index through the ProShares S&P 500 Dividend Aristocrats ETF (NOBL). This exchange-traded fund, which has $11.5 billion in assets under management, allows investors to access the performance of the entire index. With an expense ratio of 0.35 percent, it provides a cost-effective way to invest in dividend aristocrats.
In conclusion, investing in dividend growth stocks can be a rewarding strategy for income-focused investors. The S&P 500 Dividend Aristocrats index offers a selection of companies with a long history of annual dividend increases, providing stability and potential for substantial returns over time. Whether directly selecting individual stocks or investing in an ETF that tracks the index, incorporating dividend aristocrats into your portfolio can enhance your investment returns and offer peace of mind.
