The solid and stable aristocratic dividend companies

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Aristocratic dividend companies include all those companies that have increased the dividend uninterruptedly over the years. Generalmente son empresas muy consolidadas, con una administración financiera muy sólida y que han sabido superar las crisis de los últimos años. Pero para convertirse en empresas aristocráticas de dividendos, deben pasar un filtro. Dependiendo de la zona en la que nos encontremos, puede que be más estricto o no. Pero todos disponen la fuerte característica de no haber reducido su dividendo.

These companies are so important and sought after that there is a list of them in which we can even find ETFs. Have and has developed its own stock index, and one of the ways you can invest in them is to also replicate the behavior. But is it really a good option? Or is it just another sector as it could be any other? To know everything that surrounds these companies and how to take advantage of them, pay attention to the following lines. At least for sure, you will discover some new things and a more extensive view of the market itself.

What companies are considered dividend aristocrats?

Also recognized as Dividend Aristocrats, they are companies that have maintained or increased the dividend over the years. At the same time, one of the characteristics that revolve around them is that the index of which they are part, the "S&P 500 Dividend Aristocrats" performed better más o menos normalmente. Desde 1991, el S&P 500 ha arrojado un promedio del 11% en comparación con el promedio del 13% del S&P 500 Dividend Aristocrats Index. Dicho de otra forma, un 2% más alto que el índice por excelencia.

To participate in this select index of companies, the requirements to be met would be the following:

• Trading the S&P 500.
• Have increased the dividend in the last 25 years..
• Meet minimum liquidity and size ratios.

Each year, the list of companies in the S&P 500 Dividend Aristocrats changes due to company turnover. In other words, there are years in which some leave the index and others enter, depending on their performance. Not because they are large, they dispose of the position won. Strength, consistency and financial performance in addition they are criteria that are taken into account to assess which one can be included in the list. Not for this reason, the companies that have increased the dividend each year, can continue in the same disposition to continue doing so. Having constant growth, belonging to sectors less cyclical than others, visible levels of profitability and long-term cash flows can "ensure" its continuity.

Aristocratic dividend companies in Europe?

In the case of Europe, the most prominent requirement with respect to the US S&P 500 is that the minimum number of years of dividend increase is 15. Like the others, if any of these companies ends up reducing it, it is automatically expelled from the list.

For the UK, it has a separate list of Dividend Aristocrats. The minimum requirement for the UK is 10 years. The Pay-Out for these companies would be below 100% so as not to be excluded from the lists.

The criterion of "admission" in Europe generates some controversy for this type of company since there is not one of the truly predefined ones. It is not the same follow-up that exists in North American stocks as in European ones. This generates certain discrepancies on the values to select. At the same time, the fact that it takes fewer years for admission means that the 'quality' of these companies may not be as good. This does not mean that they are bad, only that comparing a company with increments of 10 years with others that even reach 50 years, does not make sense. The latter have gone through recessions and crises, overcoming obstacles and learning to navigate the future.

What mechanisms exist to invest in these companies?

We can invest in them directly buying the shares. Basically look for the companies that belong to the index or Dividend aristocrats list. Algunas de las empresas que podemos hallar entre ellas son muy reconocidas. A partir de ahí, según el criterio de cada uno, y si le damos más relevance al historial, el porcentaje distribuido, el Ratio Precio Beneficio al que cotiza, etc. Optaremos más por unas empresas que por otras. Algunos ejemplos incluyen Coca Cola, 3M, Exxon Mobil Corp, McDonald’s, PepsiCo, Colgate – Palmolive … Entre los más conocidos.

In the case of European companies, we have some such as Danone, L'Oreal, Imperial Brands PLC, Inditex or Bayer among the most recognized.

Another modality would be through ETF's. There are exchange-traded funds that try to track the aristocratic dividend index S&P 500. Some of the ones we can find are:

What can you expect when investing in these companies?

Like any investment, the past is no guarantee of future benefits. Therefore, perhaps the good thing would be to diversify investment, between sectors and countries, or in the more global case, ETFs would position themselves as a good mechanism. The set of companies that belong to each aristocratic dividend company index performed well in the past. They are not so susceptible to "bubbles", and "endure" recessions without being so affected, in quotation marks because even when less severely they also suffer the effects.

In a timely manner, we can see some of them being priced more attractively. Either due to a crisis in the sector to which they belong, or due to a reputational crisis for a product. These scenarios, if evaluated well, usually present good entry possibilities.