What are Dividend Kings, and should you invest in Dividend King stocks? You may have heard of Dividend Achievers or Dividend Aristocrats, but what exactly is a Dividend King? And are Dividend Kings the best stocks to buy?
Dividend Kings seems to be an outgrowth of the Dividend Achievers and Dividend Aristocrats lists started by Moody’s and S&P.
As a reminder, Dividend Achievers are companies that have increased their annual dividend payments every year for at least ten consecutive years.
Dividend Aristocrats are S&P 500 companies that have increased their dividends for at least 25 consecutive years.
The Definition of a Dividend King
So then what exactly is a Dividend King?
According to the “internet,” Dividend Kings are S&P 500 companies that have paid a dividend for at least 50 consecutive years. Well, that is, according to some people on the internet.
According to others, a Dividend King doesn’t have to be an S&P 500 company. Any company that has increased its dividend for 50 consecutive years is a Dividend King.
We are too, and we have been investing in companies that pay dividends and make regular annual dividend increases since before many of these terms were even a thing.
As far as we can tell, “Dividend Kings” is an invention of the internet.
The problem with the internet is…well, you know.
The problem with the Dividend Kings is that there isn’t a sound investment case for the 50-year rule.
What is significant about 50 years of dividend hikes vs. 25 years? Yes, we would agree more is generally better, but why not 40 years or 30 years?
Are Dividend Kings Better than Dividend Achievers or Dividend Aristocrats?
Do Dividend Kings perform better than other dividend growth stocks? Maybe, but there isn’t enough data to draw a statistically significant conclusion on the performance of Dividend King stocks.
We dug through some of our back issues of the Dividend Achiever’s Handbook to provide historical context.
In 2002 there was only one company that would have qualified as a Dividend King. That company was Aon.
In 2007 there were seven companies that qualified as Dividend Kings. Aon wasn’t one of them as the company cut its dividend in 2003.
Of the seven that qualified in 2007, two have since lost Dividend King status. That’s about a 30% dropout rate.
The average return of an equally weighted portfolio of those seven companies has done better than the S&P 500 since 2007, but it has performed no better than the Dividend Aristocrats Index. And don’t forget we are only talking about a sample size of seven. Two stocks account for most of the return.
Today, there are 24 companies that would qualify. There are some outstanding firms that make the list, but investors buying stocks simply because they meet the definition of a Dividend King may be disappointed with the results. See the table below for the full list of Dividend Kings.
The Dividend Kings List: What Companies Qualify?
|Company||Yield||Years of Increases|
|American States Water Co. (AWR)||1.44%||65|
|Procter & Gamble (PG)||2.43%||65|
|Dover Corp. (DOV)||1.78%||63|
|Northwest Natural Gas Co. (NWN)||2.78%||63|
|Emerson Electric Co. (EMR)||2.71%||62|
|Genuine Parts Co. (GPC)||2.91%||62|
|3M Co. (MMM)||3.42%||60|
|Cincinnati Financial Corp. (CINF)||2.12%||58|
|Lowe’s Companies Inc. (LOW)||1.90%||57|
|The Coca-Cola Co. (KO)||2.98%||56|
|Colgate-Palmolive Co. (CL)||2.55%||56|
|Illinois Tool Works, Inc. (ITW)||2.49%||56|
|Tootsie Roll Industries Inc. (TR)||1.05%||55|
|ABM Industries, Inc. (ABM)||1.91%||54|
|Johnson & Johnson (JNJ)||2.76%||54|
|Altria Group Inc. (MO)||6.76%||53|
|Hormel Foods Corp. (HRL)||2.05%||52|
|California Water Service Group (CWT)||1.54%||51|
|Federal Realty Investment Trust (FRT)||3.24%||51|
|H.B. Fuller Company (FUL)||1.28%||51|
|Stanley Black & Decker, Inc. (SWK)||1.80%||51|
|Stepan Co. (SCL)||1.15%||51|
|Commerce Bancshares, Inc. (CBSH)||1.56%||50|
|SJW Group (SJW)||1.70%||50|