An Income Stream That Increases Every Single Year
Dividend-paying stocks give shareholders a certain peace of mind simply because they provide regular payments — usually every quarter and sometimes even every month.
Of course, it’s even better if these companies have a long history of steadily increasing their dividend payments!
Standard & Poor’s, where I used to work, even has a special index for them. It’s called the S&P 500 Dividend Aristocrats index and it contains S&P 500 constituents that have increased their dividends for at least 25 years straight.
That’s the only criteria used for this particular index, but the group has posted an impressive track record of income growth and capital appreciation.
As shown in the chart below, they left the broader index in the dust giving investors a 10.61% annualized return compared to the S&P 500’s 7.44% since 2007.
There’s even a fund that tracks the Dividend Aristocrats: The ProShares S&P 500 Dividend Aristocrats ETF (NOBL).
Let’s take a closer look at which companies make the grade …
The 25-year club
Now, 25 years of consecutively increasing dividends is pretty darn good. That means each of these companies continued paying shareholders during at least three recessions …
- 1990-1991: In the early 1990s our country was feeling the shock of doubling oil prices following Iraq’s invasion of Kuwait and the Savings and Loan crisis here in the U.S.
- 2000-2001: After the Y2K scare in 2000, we had the dotcom bubble bust in 2001 and the 9/11 terror attacks.
- The Great Recession of 2008-2009: The subprime mortgage crisis was the trigger of this 18-month-long banking crisis.
Yet despite all those rough patches, these companies didn’t miss a beat … handing out ever-rising payments to their shareholders:
- Cardinal Health, Inc. (CAH) — 29 years
- Chevron Corp. (CVX) — 31 years
- AT&T, Inc. (T) — 32 years
- Brown-Forman Corp. (BF.B) — 33 years
- Air Products and Chemicals, Inc. (APD) — 34 years
- Franklin Resources, Inc. (BEN) — 35 years
- Exxon Mobil Corp. (XOM) — 35 years
- Sherwin-Williams Co. (SHW) — 38 years
- Medtronic, Inc. (MDT) — 39 years
- McDonald’s Corp. (MCD) — 40 years
- Pentair PLC (PNR) — 41 years
- Automatic Data Processing, Inc. (ADP) — 42 years
- Nucor Corp. (NUE) — 43 years
- Kimberly-Clark Corp. (KMB) — 44 years
- Abbvie, Inc. (ABBV) — 45 years
- WW Grainger, Inc. (GWW) — 46 years
- Stanley Black & Decker, Inc. (SWK) — 49 years
Of course, some companies have done even more …
In the “50-year club” we have companies that have increased their dividends every year for at least half a century, all the way back to 1967.
That means they kept paying higher dividends even during two additional recessions:
- 1973-1975: This came about when OPEC quadrupled oil prices.
- 1980-1982: The Fed raised interest rates to combat double-digit inflation. On top of that, the Iranian Revolution reduced U.S. oil supplies and drove up prices.
The members of this exclusive group of dividend payers include:
- Hormel Foods Corp. (HRL) — 51 years
- Illinois Tool Works, Inc. (ITW) — 53 years
- Colgate-Palmolive Co. (PG) — 53 years
- Coca-Cola Co. (KO) — 54 years
- Johnson & Johnson (JNJ) — 54 years
- Lowe’s Co., Inc. (LOW) — 54 years
- Cincinnati Financial Corp. (CINF) — 56 years
- 3M Co. (MMM) — 58 years
And finally, there are the granddaddies of the perpetual dividend raisers … members of the 60-year club!
This group of old timers is the toughest of the tough!
On top of all the recessions mentioned above, these guys increased shareholder payouts while dealing with two more recessions …
- 1957-1958: The Fed tightened monetary policy to curb inflation. But prices continued to rise. GDP declined 3.3% and unemployment rose to 6.2%.
- 1960-1961: The Fed again raised interest rates. GDP fell 1.6% and unemployment hit 7.1%.
This elite group includes:
- Emerson Electric Co. (EMR) — 60 years
- Proctor & Gamble Co. (PG) — 60 years
- Genuine Parts Corp. (GPC) — 61 years
- Dover Corp. (DOV) — 61 years
- American States Water Co. (AWR) — 63 years
Obviously, a long history of consistent dividend hikes is a great criterion when you’re looking for investments that can increase your wealth through good times and bad … but it isn’t the only thing to consider.
I typically look at a number of additional factors — everything from a company’s near-term business prospects to how it might fit with other investments in a given portfolio.
In future Roadmaps, we’ll talk more about some of those other metrics!
To a richer life,
for The Rich Life Roadmap