Why The Dividend Aristocrats Are Good Investments To Generate Long-Term Wealth

Investing can seem overwhelming, particularly for beginners. But for those willing to put in the time, investing can be one of the most rewarding financial moves a person can make.

For most, the destination of investing is financial independence. The stock market is an excellent vehicle to accomplish this. More specifically, dividend growth stocks have generated strong returns over the past several decades.

At Sure Dividend, we routinely discuss the Dividend Aristocrats. These are stocks in the S&P 500 Index, with 25+ consecutive years of dividend increases. You can see all 51 Dividend Aristocrats here.

For investors interested in long-term dividend stocks, the Dividend Aristocrats are a great place to look. Fortunately, in the Internet age, an abundance of information is available at investors’ fingertips.

There are plenty of tools that can give investors a platform to ask each other questions. Recently, a Quora user asked “Would allocating my money among the ‘dividend aristocrats’ be a good investing strategy to generate income and wealth”?

Our answer to this question is a resounding ‘yes’. This article will provide a detailed look at why the Dividend Aristocrats are a great way to build wealth.

Dividend Aristocrats Overview

There are many different types of stocks an investor can purchase. Stocks come in all shapes and sizes—from small caps to large caps, across every economic sector. History has shown that the stock market has consistently outperformed other asset classes, over long periods of time.

For example, noted Wharton professor Jeremy Siegel calculated that $1 invested in the stock market in 1802, would have grown to $8.8 million in 2003. Meanwhile, the same $1 invested in bonds would have grown into $16,064 by 2003, while $1 in gold would amount to just $19.75.

Not all stocks choose to pay dividends to shareholders. On the other hand, many stocks do pay dividends, and these are the types of stocks we focus on at Sure Dividend. In particular, we frequently recommend investors begin their search with the Dividend Aristocrats.

Just about 1 out of every 10 stocks in the S&P 500 qualifies as a Dividend Aristocrat. In other words, 90% of the large-cap market index do not currently qualify, which speaks to the exclusivity of the Dividend Aristocrats.

The list of Dividend Aristocrats is balanced across market sectors.

SP Overview

Source: S&P 500 Fact Sheet

The highest allocation of the Dividend Aristocrats is in the consumer staples, industrials, and healthcare sectors. This should come as no surprise, as these industries enjoy steady product demand from year to year, even during recessions.

Consumer goods, industrial components, and healthcare products are used each day by millions of people and businesses. They are vital to the normal functioning of the economy, which naturally allows for the industry leaders to raise their dividends each year.

And, dividends require a certain level of discipline on the part of company management teams. Companies that have maintained long track records of dividend growth understand how important the dividend is to their investors. This makes it less likely they will embark on wasteful spending projects, or pursue ’empire-building’ acquisitions that do not benefit shareholders.

To answer the above question posted on Quora, the Dividend Aristocrats are a great investment strategy to generate long-term wealth. Not only have the Dividend Aristocrats outperformed the broader market index over the past 10 years, but they have done so with lower volatility along the way. In other words, the Dividend Aristocrats provide higher returns for less risk, than the average stock in the S&P 500.

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Disclosure: Sure Dividend is published as an information service. It includes opinions as to buying, selling and holding various stocks and other securities.

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