Through the first 4+ months of 2015, the S&P 500 (measured here by SPY) has returned 2.6%. Over the same time period, the Dividend Aristocrats index (measured here by NOBL) has returned 1.6%. The primary cause of weakness in the Dividend Aristocrats Index is fears of rising interest rates.  These fears are misguided as the evidence shows.

While the Dividend Aristocrats Index as a whole has mildly underperformed the S&P 500 so far this year, several stocks have stood out thanks to their stellar performance. In total, 8 Dividend Aristocrats have realized double-digit returns in fiscal 2015. Judging stocks based on a little over 4 months of performance reveals very little about the long-term investing merits of a company. This article looks at the top performing Dividend Aristocrats to show what companies the market is bullish on at this time.

Most of the top performers so far are not well-liked by The 8 Rules of Dividend Investing in part because of their recent price run ups. I’d rather buy stocks when their price declines and yields increase than the reverse.

#8 – Sherwin Williams (SHW)

• Year-to-date return: 10.75%
• Current dividend yield: 0.92%
• Current Sure Dividend Rank: 73 out of 163

#7 – Target (TGT)

• Year-to-date return: 10.84%
• Current dividend yield: 2.49%
• Current Sure Dividend Rank: 112 out of 163

#6 – EcoLab (ECL)

• Year-to-date return: 11.65%
• Current dividend yield: 1.13%
• Current Sure Dividend Rank: 38 out of 163

#5 – Hormel (HRL)

• Year-to-date return: 11.81%
• Current dividend yield: 1.73%
• Current Sure Dividend Rank: 44 out of 163

#4 – Cardinal Health (CAH)

• Year-to-date return: 12.56%
• Current dividend yield: 1.51%
• Current Sure Dividend Rank: 138 out of 163

#3 – McGraw Hill Financial (MHFI)

• Year-to-date return: 18.50%
• Current dividend yield: 1.26%
• Current Sure Dividend Rank: 152 out of 163

#2 – PPG Industries (PPG)

• Year-to-date return: 18.79%
• Current dividend yield: 1.17%
• Current Sure Dividend Rank: 94 out of 163

#1 – Walgreens-Boots Alliance (WBA)

• Year-to-date return: 21.27%
• Current dividend yield: 1.47%
• Current Sure Dividend Rank: 83 out of 163

Analysis of Market Sentiment

One thing that stand out about the top performing Dividend Aristocrats so far this year is that 7 of the top 8 (Target is the exception) have dividend yields below 2%. The market has rewarded low-yield stocks so far this year. This makes sense, when one considers the overall sentiment that the Federal Reserve will likely raise interest rates in 2015.

Most of the stocks above (Walgreens-Boots is the biggest exception) derive the majority of their profits from operations in the U.S. The strengthening U.S. dollar is another dominant theme in markets so far this year. The stronger the U.S. dollar, the more damage is done to multinational corporations that must repatriate earnings back to the U.S. The strong U.S. dollar benefits companies who purchase products overseas and sell them in the U.S.

Opportunities from Current Market Trends

Some stocks have benefited from a stronger U.S. dollar. The third trend so far this year is low oil prices. A strong dollar and low oil prices (a bit of a historical oddity considering the USD’s correlation to oil prices). This unique combination of events have made several high quality Dividend Aristocrats perform poorly so far in 2015 – opening up the door to purchase these businesses at a discount. Several of these are listed below:

• Wal-Mart (WMT) – Down 5.53% year-to-date
• ExxonMobil (XOM) – Down 6.76% year-to-date
• Kimberly-Clark (KMB) – Down 6.77% year-to-date

To download an Excel spreadsheet of all the Dividend Aristocrats sorted by year-to-date performance, click the link below:

Dividend Aristocrats Performance Spreadsheet