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Dividend Aristocrats 2021: Is Dividend Growth a Good Investing Strategy?

S&P 500® Dividend Aristocrats® measure the performance of S&P 500 companies that have increased dividends every year for the last 25 consecutive years. The basic construction methodology for the index is as follows:

Dividend Aristocrats exist across a wide range of industries, and representation within the index is quite broad.

There are 65 Dividend Aristocrats for 2021:

SymbolNameSectorYears of Annual Dividend Increases10 year Dividend GrowthDividend Yield
ABBVAbbVie Inc.Health Care4818.50%4.85%
ABTAbbott Laboratories**Health Care485.73%1.64%
ADMArcher-Daniels-Midland CoConsumer Staples459.15%2.86%
ADPAutomatic Data ProcessingInformation Technology4611.85%2.11%
AFLAFLAC IncFinancials386.99%2.97%
ALBAlbemarle Corp.Materials2610.52%1.04%
AOSSmith A.O. CorpIndustrials2721.92%1.90%
APDAir Products & Chemicals IncMaterials3910.43%1.96%
ATOAtmos EnergyUtilities375.74%2.62%
BDXBecton Dickinson & CoHealth Care498.02%1.33%
BENFranklin Resources IncFinancials4113.92%4.48%
BF.BBrown-Forman Corp BConsumer Staples378.10%0.90%
CAHCardinal Health IncHealth Care2510.08%3.63%
CATCaterpillar IncIndustrials279.13%2.26%
CBChubb LtdFinancials279.11%2.03%
CINFCincinnati Financial CorpFinancials604.06%2.75%
CLColgate-Palmolive CoConsumer Staples575.60%2.06%
CLXClorox CoConsumer Staples437.53%2.20%
CTASCintas CorpIndustrials3819.33%0.79%
CVXChevron CorpEnergy346.21%6.11%
DOVDover CorpIndustrials658.22%1.57%
ECLEcolab IncMaterials2911.73%0.89%
EDConsolidated Edison IncUtilities472.54%4.23%
EMREmerson Electric CoIndustrials644.03%2.51%
ESSEssex Property TrustReal Estate267.08%3.50%
EXPDExpeditors InternationalIndustrials2610.03%1.09%
FRTFederal Realty Invt TrustReal Estate534.74%4.98%
GDGeneral DynamicsIndustrials2910.17%2.96%
GPCGenuine Parts CoConsumer Discretionary646.75%3.15%
GWWGrainger W.W. IncIndustrials4911.06%1.50%
HRLHormel Foods CorpConsumer Staples5516.04%2.10%
IBMIntl Business MachinesInformation Technology2510.04%5.18%
ITWIllinois Tool Works IncIndustrials4613.10%2.24%
JNJJohnson & JohnsonHealth Care586.55%2.57%
KMBKimberly-ClarkConsumer Staples495.54%3.17%
KOCoca-Cola CoConsumer Staples586.42%2.99%
LEGLeggett & PlattConsumer Discretionary494.30%3.61%
LINLinde plcMaterials277.90%1.46%
LOWLowe’s Cos IncConsumer Discretionary5818.85%1.50%
MCDMcDonald’s CorpConsumer Discretionary458.35%2.40%
MDTMedtronic plcHealth Care4310.05%1.98%
MKCMcCormick & CoConsumer Staples359.08%2.85%
MMM3M CoIndustrials6210.84%3.36%
NEENextEra EnergyUtilities2610.84%1.81%
NUENucor CorpMaterials481.12%3.05%
ORealty Income Corp.Real Estate264.93%4.53%
PBCTPeople’s United FinancialFinancials281.51%5.57%
PEPPepsiCo IncConsumer Staples487.84%2.76%
PGProcter & GambleConsumer Staples645.16%2.27%
PNRPentair PLCIndustrials454.06%1.51%
PPGPPG Industries IncMaterials496.78%1.50%
ROPRoper Technologies, IncIndustrials2818.36%0.52%
SHWSherwin-Williams CoMaterials4214.05%0.73%
SPGIS&P GlobalFinancials4711.05%0.82%
SWKStanley Black & DeckerIndustrials537.57%1.57%
SYYSysco CorpConsumer Staples516.05%2.42%
TAT&T IncCommunication Services372.16%7.23%
TGTTarget CorpConsumer Discretionary5312.30%1.54%
TROWT Rowe Price Group IncFinancials3412.79%2.38%
VFCVF CorpConsumer Discretionary4812.94%2.29%
WBAWalgreens Boots Alliance IncConsumer Staples4511.46%4.69%
WMTWal-MartConsumer Staples476.18%1.50%
WSTWest Pharmaceutical ServicesHealth Care287.18%0.24%
XOMExxon Mobil CorpEnergy387.18%8.44%

Dividend Aristocrat Underperformance

In 2020, the S&P 500 Dividend Aristocrats significantly underperformed the S&P 500. In fact, you would have to go back to 10yr annualized returns to see the S&P Dividend Aristocrats beat the S&P 500. The table below shows returns vs benchmark for various periods ending January 29, 2021.

The recent underperformance of the S&P 500 Dividend Aristocrat index is likely due to non-divided and new dividend payers like Tesla and Apple – which are excluded from the list of Dividend Aristocrats – leading market performance.

The performance story changes the longer the time period. Beyond 10yrs, the Dividend Aristocrats have created value for investors. Dividend Aristocrats have outperformed in 16 of the 31 years since 1989.

Periods of Dividend Aristocrat outperformance tend to be clustered around bear markets – early 1990s, early 2000s, late 2000s. This makes intuitive sense since higher-beta growth stocks outperform during bull markets but get slaughtered when earnings are chopped due to economic recession. In contrast, more stable companies – ones that tend to fit the profile of Dividend Aristocrats – usually have the balance sheet strength and cash flows to withstand an economic downturn.

(Keep in mind the 10yr in the table data above doesn’t go back far enough to include the last recession.)

Booms and busts are a fact of life. The question investors must ask is which environment will prevail over the next decade. Will tech stocks continue to outperform? Or will the market once again appreciate stable dividend growers? Or do we have to wait for a full market cycle before judging?

In its raw form, the question comes down to growth vs value investing, as the characteristics of Dividend Aristocrats tend to align with those of value companies. Value has materially underperformed growth for some time. Dividends have not made up for the difference, yet many people swear by the dividend growth investing methodology. I believe there is a good reason why.


There is a lot more to individual investor performance than index returns.

Investor behaviour is by far a better predictor of portfolio returns than the performance of underlying holdings. The following table compares returns for investors in equity, asset allocation and fixed income funds against benchmark index returns.

Over a 20 year period ending December 31, 2015, equity fund investors saw returns about half that of the index. This is mainly because investors make human mistakes and tend to buy and sell at the wrong times, instead of simply holding and experiencing market returns. Most investors sell after the market has significantly declined and buy after the market has risen.

Dividend growth investing can help control behavioural mistakes.

This investor behaviour has real impacts to wealth. As you can see in the chart below, investors lose about half of what they otherwise should have earned due to emotional mistakes.

Dividend growth investing can help control behavioural mistakes

A dividend received quarterly – even if it is simply reinvested – is a consistent positive reward for being invested. I believe dividends condition investors to want to hold investments.

So while capital levels still fluctuate with the market, a consistent cash inflow helps train the investor to remain fully invested. Indeed, a focus on incoming income makes dividend growth investors want to buy more as prices decline and yields rise. Consequently, I believe dividend growth investing can help investors achieve returns closer to the market rate.

Income Investing

Top 10 Dividend Yields on TSX 60

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Company NameLast PriceEPS (TTM)Div/ShareEx-Div DateDiv Payment DateForward Dividend Yield
Brookfield Property Partners L.P.21.66-11.3311/27/202012/30/20207.73%
Enbridge Inc.44.080.963.172/11/20212/28/20217.44%
Pembina Pipeline Corporation34.861.612.491/22/20212/11/20217.22%
BCE Inc.55.762.513.29Dec 14, 20201/14/20215.96%
TC Energy Corporation544.733.1812/30/20201/28/20215.73%
Power Corporation of Canada31.442.652.1512/30/2020Jan. 31, 20215.71%
Shaw Communications Inc.22.51.321.192/11/20215/27/20215.27%
Canadian Natural Resources Limited31.36-0.51.659/17/20201/4/20215.15%
Canadian Imperial Bank of Commerce113.788.225.8212/24/20201/27/20215.14%
The Bank of Nova Scotia70.45.33.61/4/20211/26/20215.13%
Data is provided ‘as-is,’ ‘with all faults’ and ‘as available.’ We do not guarantee the accuracy or timeliness of information available.

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New Year. Same Story.

December 31, 2020. We were all thankful that the worst year ever was finally over. Yet, so far 2021 is less than two weeks in and the drama is escalating.

I won’t get into the politics, because it’s the politics that is tearing us apart. Instead, I’ll focus on what we all agree on: this is some bullshit!

People are going broke, businesses are closing, folks are sick and dying. The population is at each others’ throats. Oh, and the climate is in slow collapse.

If there ever was a year to take personal responsibility, it’s 2021. Nobody is going to come fix your job, your marriage, your savings account. It’s up to each of us to make this a better world.

It wasn’t always this way. During the mid-20th century, most people could follow a predestined path that led to decent wealth and security. One didn’t really need to think or be different. You just needed to pick a direction and go. The baby boomer benefited from a post-war economic tide that lifted all boats. You had to f&ck up pretty bad to not do well as a boomer.

I don’t have to tell you those days are long gone.

Kids today enter the system saddled with debt because they were forced to get two masters degrees for an entry-level clerk job. Same job 50 years ago went to a high school grad. And that grad would then get married at 21, buy a house at 22 and support a nuclear family through to retirement on a single income and fat DB pension.

No more.

But you already knew this. You’ve seen the wealth disparity charts. Unless you’re one of the lucky ones, you’ve probably personally felt the pressures. I certainly have.

My story in 4 words: it’s all on me.

I have people depending on me to keep it together. Pay the bills, keep food on the table.

I have a successful career. But I fully realize it could end at any moment. I’ve seen dozens of my colleagues over the past 20 years hit a brick wall and never recover. This isn’t something people in their 20s know. Careers have an expiry date, and most end before planned retirement. This isn’t something most people decades ago had to consider.

If there’s one thing I want you to do this year, it’s this: consider what happens if your career ends next year, in 5 years, in 10 years. And when I say ‘end’ I mean END! Like your prospects are reduced down to shuffling coffees at the local diner.

How will you pay the rent and buy food?

With any luck, you have years to prepare. If you are young, you probably have many years of career growth ahead of you. But know this: 50 year old unemployed executives have few prospects. So prepare.

The simple answer many provide is to start a side hustle. Let me level with you. DumbWealth is my side hustle and I don’t make a dime. I do this as a labor of love and it’s still time-consuming and exhausting. I can’t imagine truly putting in an extra 4-5 hours a day after work (and life) to build a secondary source of income. I should, but who has the time or energy. Work, life, kids, exercise, chores. If you’re truly going to start a side hustle, one (or all) of these things inevitably gets neglected. You need a very understanding family and nearly infinite amounts of energy to build a viable side hustle.

OK, so why not take a hobby and try to make something of that?

Photography, painting, woodwork. Sounds great in theory, but turning a hobby into a business is a great way to kill that hobby. The business of photography is about 20% photography and 80% sales and marketing.

If you’re reading all this and saying “well, but…” then all the power to you. You might just be determined enough to pull it off. Some people are.

The rest of us need to build financial freedom in other ways. We need to save, invest and earn a little more at work. It’s a simple and powerful formula that most people neglect, either because it’s boring or they’re addicted to consumerism.

Cut your expenses, save as much as possible and invest that money in a portfolio that will eventually pay you for doing nothing. The income generated from an investment portfolio is probably the greatest gift we can give ourselves. It’s the one way to create a passive income without really doing much more than you’re already doing. You still work the same hours and have the same salary. You just need to sprinkle some planning and discipline onto your daily habits.

Start small, but start today. It’s a slow build that often leaves you questioning the plan. But keep at it and there should be a day when that investment portfolio earns enough to cover your basic needs if you were laid off. If all goes right, there might even be a day when that portfolio allows you to quit your job. That’s financial freedom.