My pop-punk band released a new single this month. The lyrics start out “We’re having a party and you’re not invited…” The song is about a guy who can’t handle his alcohol. He becomes a drunk jerk who’s no longer invited to the party.
It’s a tale as old as time. There’s a club or a party and not everyone is invited. That is true even in the world of dividend investing. There is a group of dividend stocks I call dividend royalty. In reality, they are divided into two separate groups.
The best thing about these elite dividend stocks is that there are no special hoops to jump through to buy them. They are simply big, boring, solid dividend companies that have achieved a series of criteria. And out of the more than 4,000 public companies, only 90 make up the combined list.
These stocks make great candidates as Bedrock holdings in our portfolio. These are stocks we could hold for decades to come and we reinvest the dividends to amplify how hard our money works for us.
The Road to Dividend Royalty
I’m talking about Dividend Aristocrats and Dividend Kings. The slightly bigger of the two groups is the Dividend Aristocrats, with 67 member companies. This is after Walgreens Boots Alliance (WBA) fell off the list and Fastenal (FAST) joined the group.
To qualify as an Aristocrat, a company must:
Raise its dividend every year for 25 consecutive years;
Be a member of the S&P 500;
Have a market capitalization of at least $3 billion;
Maintain average daily trading volume of $5 million for three months before acceptance.
You can see why these big, safe, stable companies are great candidates for Bedrock holdings.
The other group is the Dividend Kings, with 54 current members. Keep in mind that there is some overlap between the two groups.
To become a Dividend King, a company must increase its dividend payout for the past 50 years. That’s it. That’s the only requirement. At first, you might think it would be easier to be on this list. But just think about the economic challenges that we’ve seen over the past 50 years. The COVID pandemic and the Great Recession of 2008 are two examples still fresh in the minds of investors.
Even so, the Kings list just saw 5 new additions: Archer-Daniels-Midland (ADM), Fortis (FTS), Kenvue (KVUE), RPM International (RPM), and United Bankshares (UBSI). Half of companies on this list are from two sectors—consumer defensive and industrials.
Dividend Royalty: A Great Place to Start Your Due Diligence
More than half of these dividend royalty members are large-cap companies with a market capitalization of $10 billion or more. Big, boring, and stable are some of my favorite words to describe these investments.
However, these titles are based on past performance. We’ve been in the market long enough to know that past performance does not always mean future success.
Over the past couple of years, we’ve seen royalty fall from the list. In December, Walgreens (WBA) cut its dividend nearly 50%. And just like that, this Dividend Aristocrat’s 47-year streak of annual dividend increases came crashing down. It was just three years shy of earning the King title.
Earlier last year, we saw V.F. Corp. (VFC) fall from grace as well. It was just one year shy of reaching Dividend King status… and then shareholders were hit with a second cut just a few months later.
This isn’t extremely common. But we should always use this list as a starting point and not the last word on dividends.
If you want to take a look at the full lists of Dividend Kings and Aristocrats, I’ve added them to the resources section of our Dividend Digest community. You can join for free by downloading the Mauldin Economics app, or through your web browser by clicking here.
This is the first of many new resources I’ll be adding over the next few months. All of this is completely free for you.
And as always, if you want to check out my premium research service Yield Shark you can do so here. We currently hold five of these royalty companies in the portfolio.
For more income, now and in the future,
