How Have Dividend Aristocrats Performed Compared to the S&P 500 In the Last Decade?

How Have Dividend Aristocrats Performed Compared to the S&P 500 In the Last Decade?

Dividend Aristocrats are a group of fundamentally strong companies, allowing them to increase dividends each year for at least 25 consecutive years.

There are multiple ways investors can gain exposure to the equity market, depending on their risk appetite and ability to pick stocks. They can invest passively in stocks via exchange-traded funds or ETFs, which is ideal for individuals with a low-risk profile. 

Alternatively, investing in growth stocks can help you deliver market-thumping gains during a bull market, but these stocks are often the ones that suffer most during a downturn.

Another popular investment strategy on Wall Street is dividend investing, where you purchase quality dividend-paying stocks. Investing in dividend stocks allows you to generate a steady stream of predictable income via regular payouts and benefit from long-term capital gains via the appreciation of stock prices. 

What are dividends, and why do companies pay them?

Companies may opt to pay a dividend to investors from a portion of their profits. 

With its profits, a company can either reinvest its cash flows to expand quickly, reduce its debt balance, repurchase shares, or pay out a dividend. Ideally, a dividend-paying company should be consistently profitable, making these payouts sustainable. 

While dividend payments are not an obligation, they are viewed as a positive sign by Wall Street. Generally, companies pay investors quarterly dividends, allowing them to derive steady cash flows, which increases shareholder wealth over time. 

Alternatively, a dividend suspension usually results in a steep decline in stock prices.. 

What are Dividend Aristocrats?

Dividend Aristocrats are a group of companies that have increased dividends each year for 25 consecutive years. As they have consistently raised dividends, companies that are part of the Dividend Aristocrats list tend to have strong fundamentals, robust cash flows, and resilient business models. 

These stocks have demonstrated an ability to combat market turbulence, making them ideal bets in the current environment, which is volatile and uncertain. 

The S&P 500 Dividend Aristocrats index was launched in 2005 and provides exposure to 65 blue-chip companies that have increased dividends for at least 25 consecutive years. The average market cap of these holdings is around $91 billion, while the average dividend yield is 2.2%.

Let’s take a look at some of the most popular companies that are part of this index. 

Exxon Mobil

Valued at a market cap of $351 billion, Exxon Mobil (NYSE: XOM) is among the largest integrated energy companies globally. Exxon Mobil has paid increased dividends for 39 consecutive years and offers investors a forward yield of 4.15%. 

The energy heavyweight has managed to lower its cost structure over the years allowing it to generate around $40 billion in free cash flow in the last four quarters. Exxon Mobil ended Q1 with a cash balance of $11 billion due to rising oil prices, providing the company with enough liquidity to endure the next cycle. 


One of the most recognizable brands in the world, Pepsi (NASDAQ: PEP) is valued at a market cap of $236 billion. Yet, despite its colossal size, the consumer products company has been experiencing accelerated top-line growth in recent years. 

Pepsi’s revenue rose by 13% in 2021, compared to the 5% growth in 2020 and a 4% uptick in 2019. In Q1 of 2022, its net income more than doubled while the company’s cash flow stood at $1 billion. 

Pepsi has increased dividends for 50 consecutive years and currently offers a forward yield of 2.7%. 


A company that operates in the industrial sector, Caterpillar (NYSE: CAT), has a well-diversified business. With a market cap of $92 billion and a dividend yield of 2.8%, Caterpillar has increased dividends for 27 consecutive years. 

During the pandemic-fueled bear market of 2020, Caterpillar’s construction business managed to deliver stellar results. Similarly, the energy and transportation business has gained momentum in the last year. 

Caterpillar is trading at a forward price to earnings multiple of 13.8x, which is very reasonable given analysts expect earnings to rise by 24.7% annually in the next five years. 

The Dividend Aristocrat ETF vs. S&P 500

In the last ten years, the S&P 500 Dividend Aristocrat Index has returned 12.95% to investors on an annual basis. Comparatively, the S&P 500 index is up 13.1% annually in this period. 

While the returns are pretty similar in the last decade, investors should note that the Dividend Aristocrat ETF has outpaced the S&P 500 in the more recent past. 

The S&P 500 index is down 18.7% year-to-date and has declined by 10.2% since July 2021. Comparatively, the Dividend Aristocrat ETF has declined by 3.7% in the last year and is down 12.2% in 2022. 

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