S&P 500 Dividend Aristocrat Index Defined, List of Top Companies

What Is the S&P 500 Dividend Aristocrats Index?

The S&P 500 Dividend Aristocrats Index is a list of companies from the Standard & Poor's 500 Index (the S&P 500) that have a track record of raising their dividends for at least 25 consecutive years. Each company is equally weighted within the index.

Understanding the S&P 500 Dividend Aristocrats Index

The S&P 500 Dividend Aristocrats Index tracks the performance of well-known, mainly large-cap, blue-chip companies. Standard & Poor's will remove companies from the index when they fail to increase dividend payments from the previous year. The index is rebalanced quarterly in January, April, July, and October.

The S&P 500 Dividend Aristocrats includes stocks with a float-adjusted market capitalization of at least $3 billion and an average daily trading volume of at least $5 million, in addition to consistently increasing dividend payments. The index requires a minimum of 40 companies and currently has 66 constituents as of July 31, 2023.

The strength of the dividend aristocrats lies in their ability to continually increase dividend payments to shareholders. When compared to the S&P 500 itself, the Aristocrats index has not outperformed the S&P 500, in either 1-year, 3-year, or 5-year annualized returns, as of Aug. 28, 2023.

One criticism of companies on the dividend aristocrats list is they sometimes use share buybacks to facilitate dividend increases. The problem is a true dividend aristocrat should increase payouts to shareholders from year to year, and if the company is overpaying for its shares, it may not be acting in shareholders’ best interests, even if dividends are increasing.

S&P 500 Dividend Aristocrats Constituents

Dividend aristocrats come from various industries and sectors and are of varying ages; though of course, they have to have been in business for a quarter-century, at least. Some companies have booked dividend growth for decades, such as Emerson Electric Co. (EMR), which sells electronic products and engineering services to industrial clients.

Other companies, like Roper Technologies (ROP), a designer of software and other products, and A.O. Smith (AOS), which makes water heating and purification equipment, became eligible in 2018.

While the Dividend Aristocrats Index tends to feature well-known firms, being a blue-chip stock doesn't guarantee inclusion. A company can be dropped from the index if it does not increase its dividend for one year or if it is removed from the broader S&P 500 Index.  The 2008 recession, in particular, caused the removal of many big-name companies from the list like Bank of America (BAC), General Electric (GE), and Pfizer (PFE).

Top S&P 500 Dividend Aristocrats

As of July 31, 2023, nearly half of the S&P 500 Dividend Aristocrat companies fall into one of two sectors: industrials (24.1%) or consumer staples (22.8%). Materials (12.5%), financials (11%), and healthcare (10.4%) are other significant sectors. Here are the 10 leading individual companies as of July 31, 2023.

Investing in the S&P 500 Dividend Aristocrats

Exchange-traded funds (ETF) are a popular way of gaining exposure to the list of dividend aristocrats. One popular fund that directly follows the index is the ProShares S&P 500 Dividend Aristocrats ETF (NOBL).

Other funds that track dividend stocks but don't directly follow the index include the iShares Select Dividend ETF (DVY), the SPDR S&P Global Dividend ETF (WDIV), and the iShares Core High Dividend ETF (HDV). Even though they're not trying to track the index, each fund tends to include some of the "aristocrats," since the universe of steadily rising dividend issuers isn't all that diverse.

The Bottom Line

For dividend investors, investing in funds that track the S&P 500 Dividend Aristocrat Index could be a good strategy, as the index is made up of companies that have consistently been raising dividends for at least 25 years. Dividends add a strong income component value to stocks.