Dividend investing is intentionally including the concept that a company actively considers the dividend as part of their annual bills or responsibilities. Some dividend investors looking for consistency while others are looking for growth. Personally, I prefer companies who have increased their dividend over multiple economic conditions.
For me, stock indexes and/or stock lists provide either a starting point for my research or an investment opportunity if a particular fund invests in that list or index. Each time I have written a post about my Dividend Investment Portfolio I indicated that I use the Dividend Aristocrats as a starting point. I let Standard and Poors do the work for me eliminating probably close to 98% of the listed companies in the country using the following criteria:
- Be a member of the S&P 500 index
- Have increased dividends every year for at least 25 consecutive years
- Have a float adjusted market capitalization of at least US$ 3 billion as of the rebalancing reference date.
- Have an average daily trading volume of at least US$ 5 million for the six months prior to the rebalancing reference date.
I was recently thinking what if there are some great undervalued dividend centric investment companies out there that maybe aren’t on the S&P500 Index or maybe they have provided a rising dividend for 18 years instead of 25…do I really want to cut them out?
Additional Dividend Lists
There are two other dividend investing lists that I may start to check out:
Dividend Achiever List
The Dividend Achiever Index is the basis for many ETFs and contains over triple the amount of companies that are on the Dividend Aristocrats. The requirements to be on the Dividend Achiever Index are:
companies that have increased their annual regular dividends for at least the past 10 consecutive years and have met specific liquidity screening criteria. The Dividend Achievers are typically companies with strong cash reserves, solid balance sheets and a proven record of consistent earnings growth.
What intrigues me about this particular index is that they pull companies from not only the S&P 500 but all American Stock Exchanges. While 10 years is a very long time to continually increase a company’s dividends it is obviously not as substantial as a quarter century.
Dividend Champions List
The Dividend Champions list was created and is still maintained by David Fish over at The DRiP Investing Resource Center. While the information on the site is interesting and very comprehensive the site looks like something that was built in 1999 and never updated. Very odd. The members of the Dividend Champions List include, those stocks (not limited to the S&P 500) that have increased their dividend for the past 25 years. Since it isn’t limited to the S&P 500 it has a broader base of members.
Additionally the Dividend Champions List has a different definition of what constitutes a dividend increase,
The initial goal was to identify companies that had increased their dividend for at least 25 consecutive years, but, as explained below, the definition was broadened to include additional companies that had paid higher dividends without having increased the quarterly payout in every calendar year.
It is a slight difference but the dividend aristocrats definition of a dividend increase may be a bit more limiting.
Which Dividend Investing Index or List I am Going to Use Going Forward
I think I am going to jump ship on the Dividend Aristocrats and start using the Dividend Champions as my first line of selection. Whether the stock is part of the S&P doesn’t particularly matter when looking for undervalued quarter century dividend payers.
Which List or Index do you Use? Do you use any?