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How To Invest In The Dividend Aristocrats – Directly Or Through ETFs

This one is another interesting and lucrative investment strategy. The so-called dividend aristocrats is a group of stocks from the S&P 500 index, that have increased the dividends they pay to shareholders for at least 25 consecutive years. Sounds good, isn’t it? Not only these companies have paid dividends for a quarter of a century, but also they increased it every single year.

For the last 25 years, a portfolio containing all Dividend Aristocrats would have beaten the SP500 index big time. If you invested $1 000 in the index before 25 years you would have made around $7 990 in 2014. If you invested in The Dividend Aristocrats stocks the same amount, you would have made nearly twice – around $14 494 by the year 2014. You can see how both of these investment scenarios would have developed on the following chart:

 

The chart shows the growth of The Dividend Aristocrats compared to the growth of SP500 index for the last 25 years. Source: <a href="http://nasdaq.com

The chart shows the growth of The Dividend Aristocrats compared to the growth of the SP500 index for the last 25 years. Source:

 

How To Invest In the Dividend Aristocrats?

Well, we have a cool investment strategy, now comes the question of how we can put it into action. How can one invest in the Dividend Aristocrats? Well, this turns out to be not such a trivial thing. The list of all of the stocks contained 52 companies in 2009, then 42 companies in 2010 and 54 companies in 2014 (see all current companies at the full list of aristocrats below ). What I am trying to say is that the list constantly changes and maintaining a portfolio of all the stocks that are on the list at every point of time might be not that easy and sometimes expensive. However, here are

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3 ways to invest in the Dividend Aristocrats

1. Invest in Dividend Aristocrats ETF

There are ETF funds that always maintain a portfolio of all Dividend Aristocrats, most of them track the S&P 500 Dividend Aristocrats Index, introduced in 1989. You can invest in such a fund and leave all the work of managing the portfolio to the professionals. This might be the best option for people who have no idea of how the stock market works or how to buy shares. ETFs also have some advantages like low maintenance fees and tax benefits, so you should really consider this option. Such funds are:

SPDR S&P Dividend (SDY)

The ProShares S&P 500® Dividend Aristocrats ETF (NOBL) (0.78% expense ratio)

Vanguard Dividend Appreciation ETF (VIG)

2. Buy the stocks directly

As we said earlier, you can invest directly in the stocks of all Dividend Aristocrats companies. You can split your money into 54 parts (currently the list consists of 54 stocks) and invest each piece of cash in one of the companies. Good so far, but the bad thing is that the list is constantly updated every year. This means that every year, you should change your portfolio in order to copy the changes to the list. This might be an expensive procedure for smaller portfolios. The average cost of buying a stock in the USA is around $ 8. This means you must spend at least $432 to buy every company on the list at first and around $50-$100 to maintain your portfolio every single year after. These expenses might be much more compared to the 0.78% expense ration of the NOBL fund.

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The Dividend Aristocrats List and Index (2015)

Now, you may be wondering which these companies actually are? Here is a list of all dividend aristocrats in 2014

Information Technology

ADP – Automatic Data Processing
T – AT&T

Industrials

DOV – Dover
EMR – Emerson Electric
PNR – Pentair
ROP – Roper Technologies
SWK – Stanley Black & Decker
MMM – 3M
AOS – A.O. Smith
CTAS – Cintas
GWW – W.W. Grainger
GD – General Dynamics
ITW – Illinois Tool Works

Real Estate

FRT – Federal Realty Investment Trust

Health Care

CAH – Cardinal Health
JNJ – Johnson & Johnson
MDT – Medtronic
ABT – Abbott Laboratories
ABBV -AbbVie
BDX – Becton, Dickinson & Company

Consumer Staples

KMB – Kimberly-Clark
MKC – McCormick & Company
PEP – PepsiCo
PG – Procter & Gamble
SYY – Sysco Corporation
WMT – Wal-Mart
WBA – Walgreens Boots Alliance
ADM – Archer-Daniels-Midland
BF-B -Brown-Forman
CL – Colgate-Palmolive
CLX -Clorox
KO – Coca-Cola
HRL – Hormel Foods

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Financials

TROW – T. Rowe Price Group
AFL – Aflac
BEN – Franklin Resources
SPGI – S&P Global
CINF -Cincinnati Financial

Materials

SHW – Sherwin-Williams
NUE – Nucor
PPG – PPG Industries
PX –  Praxair
APD – Air Products and Chemicals
ECL – Ecolab

Consumer Discretionary

TGT – Target
VFC – V.F. Corporation
LOW – Lowe’s
MCD – McDonald’s
GPC – Genuine Parts Company
LEG – Leggett & Platt

Energy

XOM – Exxon Mobil
CVX – Chevron

Utilities

ED – Consolidated Edison

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