Nasdaq Dividend Achievers: Our Analysis and Rating
By: Ned Piplovic,
For income investors that find the Dividend Kings and Dividend Aristocrats lists limited and too restrictive, the Nasdaq Dividend Achievers Index might be a better option as it offers a significantly larger selection of dividend-paying equities.
As discussed previously on dividendinvestor.com, Dividend Kings is a group of S&P 500 equities that have market capitalization of at least $3 billion and have increased their annual dividend payouts for at least 50 consecutive years. With such restrictive requirements, only 16 companies currently make the cut and qualify for the Dividend Kings designation.
Like Dividend Kings, Dividend Aristocrats are also components of the S&P 500 Index with the same $3 billion minimum market capitalization requirement. However, to qualify for the Dividend Aristocrats moniker, companies must deliver only half the consecutive annual dividend boosts as Dividend Kings — 25 years. The less-stringent requirement for consecutive annual hikes, expands the number of equities in the Dividend Aristocrats group to more than 60.
However, while the Dividend Aristocrats deliver steady long-term income sources, many equities outside of the limited scope of that group offer potential for delivering significant dividend income as well, with only marginal increase in risk and volatility. Furthermore, while having shorter streaks of consecutive annual dividend hikes, some of the additional companies in the wider Nasdaq Dividend Achievers Index might have a greater potential for asset appreciation, which can combine for higher total returns then the Dividend Achievers or even Dividend Kings.
Nasdaq Dividend Achievers: Origins
Moody’s Investor Service (MIS) — currently a subsidiary of the Moody’s Corporation (NYSE:MCO) — originally developed in 1979 a Dividend Achievers list of dividend-paying equities that would become the Nasdaq Dividend Achievers. After acquiring the list from MIS in 1998, Mergent, Inc. rebranded the list but held on to the list for only four years. In 2012, Nasdaq, Inc. (NASDAQ:NDAQ) purchased the brand. Over the past 17 years, Nasdaq continuously refined the equity selection methodology and expanded the brand under its umbrella. Since acquiring the Nasdaq Dividend Achievers Index, Nasdaq, Inc, introduced rules-based methodologies to allow more transparency for investors.
Nasdaq Dividend Achievers: Basics
Nasdaq Dividend Achievers are a component of the Nasdaq Dividend and Income Index Family. The Nasdaq company licenses these indexes for various investable products, such as mutual funds, exchange-traded funds (ETFs), unit investment trust (UITs), structured products and other securities.
To qualify for inclusion as a Dividend Achiever, a company must have increased its annual dividend distribution at least 10 consecutive years. In addition to the length of dividend hikes streak, companies must also meet certain liquidity and minimum trading volume requirements.
The Dividend Achievers list captures companies with extended streaks of regular dividends. While financial experts disagree on the merits of dividend distributions, equities with long-term rising dividends appear to outperform in terms of total returns their non-dividend paying peers over extended time horizons.
Companies that commit to dividend distributions have an additional incentive to manage their business efficiently and make decisions with a long-term benefit outlook. Therefore, long-term rising dividends can help to identify well-managed companies, which make good candidates as long-term investments. Additionally, because of the long-term goals outlook, dividend-paying companies also appear more resilient to market volatility.
Nasdaq Dividend Achievers: The Indexes
The Nasdaq Dividend Achievers are a family of 11 Indexes that focus on companies committed to enhancing shareholder value through increasing dividend payouts.
- Nasdaq U.S. Broad Dividend Achievers (DAA)
- Nasdaq Dividend Achievers Select (DVG)
- Nasdaq International Dividend Achiever Select (DVGI)
- Nasdaq Dividend Achievers 50 (DAY)
- Nasdaq International Dividend Achievers (DAT)
- Nasdaq Broad Canadian Dividend Achievers (DACA)
- Nasdaq U.S. Buyback Achievers (DRB)
- Nasdaq International BuyBack Achievers (DRBXUS)
- Nasdaq Select Canadian Dividend Achievers (NQCADIV)
- Nasdaq Select Canadian Preferred Share (NQCAPFD)
- Nasdaq UK Dividend Achievers (UKDA)
Nasdaq U.S. Broad Dividend Achievers Index (DAA)
The broadest of the U.S. stock indexes — Nasdaq U.S. Broad Dividend Achievers Index (DAA) — currently contains 261 equities. The current equities makeup represents all 11 Global Industry Classification Standard (GICS) sectors and have combined market capitalization of nearly $5.3 trillion.
Individual company market capitalizations range from just $19 million for Spire, Inc. (NYSE:SR) to nearly $400 billion for the ExxonMobil Corporation (NYSE:XOM). The average market capitalization is just slightly more than $20 billion.
In terms of company count, the Industrial sector has 51 companies and the Financials sector is close behind with 48 companies. On the bottom of the list, Energy and Communication sectors are least represented with nine and six companies, respectively. The graph below shows all sectors and their share in terms of company count.
However, the ranking is quite different in terms of total market capitalization, as the following graph indicates.
The Consumer Staples sector — which accounts for less than 12% in terms of company count — accounts for 22.6% share and represents a combined capitalization of nearly $1.2 trillion. The sector with the highest company count — Industrials — manages only fourth place with a 12.3% share of total market capitalization. Moreover, the Financials sector, which is only slightly behind Industrials in a number of companies, accounts for less than 6% of the total market capitalization. The Real Estate sector, whose 12 companies account for 4.6% of the 261 total, is in last place with a mere 0.8% share of total market capitalization.
The two tables below show a complete comparison of the two lists.
The Index lost nearly half of its value between its inception in 2003 and its all-time low in the after math of the 2008 crisis. However, since bottoming out in late-February 2009, the Index unit price increased nearly four-fold. The value more than doubled just over the past five years.
While experiencing a pullback along with the overall market in December 2018, the index recovered quickly and continued growth for additional gains. After nearly a full decade of steady growth, the index pulled back almost 4% from the onset of the trailing 12 months to its 52-week low of $2,043.50 on December 24, 2018.
However, after reversing direction in late December, the index recovered those losses by the end of the first week in January 2019. The index price continued to rise until it reached its new all-time high of $2,702.48 on April 30, 2019, for a 32% gain over the December low. After pulling back nearly 3%, the index closed on May 7, 2019, at $ 2,627.40. This closing price was 24% higher than one year earlier, 28.6% above the December low and more than 120% higher than it was five years ago.
Professional dividend income investors have the resources to scrutinize hundreds of potential securities before selecting the ones with best investment potential. However, many investors with limited resources can take advantage of an index design to track the performance of companies with reliable records of rising dividend distributions, such as the S&P 500 Dividend Aristocrats or a more comprehensive Nasdaq U.S. Broad Dividend Achievers Index.
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