What are Dividend Kings?

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What are the dividend kings?

Dividend Kings is a category of S&P 500 companies with extraordinarily long records of consecutive annual dividend hikes.

The specific requirements for admission to this elite group of dividend-paying companies is simple: to earn the Dividend Kings moniker, an S&P 500 company must have a market capitalization of more than $3 billion and a record of raising annual dividend payout amounts for at least 50 consecutive years.

Dividend Kings is an impressive subcategory of the Dividend Aristocrats designation that has the same market-cap requirement for S&P 500 companies but requires only 25 consecutive years of annual dividend hikes.

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What are the benefits of investing in Dividend Kings companies?

An analysis of historical performances indicates that public companies that pay rising dividends reward their shareholders with higher overall returns over extended periods, as well as experience lower volatility over a long-term investment horizon. However, regardless of these back-tested results, financial and investment professionals stand in disagreement regarding whether dividend distributions contribute at all to the company’s overall long-term total returns.

Long-term distributions of rising dividend income generate a steady cash flow for investors and the rising dividends compensate for – and hopefully exceed – any inflationary effects over long time horizons.

More than just providing a steady dividend income, long-term rising dividend payouts usually indicate a well-managed company that generates sufficient earnings to cover its increasing dividend distributions and sustainable dividend payout ratios.

The lowest payout ratio in the current group of Dividend Kings is 28% and the highest current payout ratio is just shy of 80%, with a simple average of 54% for the entire group.

Any of the current Dividend Kings are potentially good investment choices for generating dividend income over extended periods. However, while some companies decide their dividend distribution amounts based on their quarterly results as they go along, some of these have specific dividend growth policies, which offer investors assurances that the company will take under consideration the targeted dividend hike when creating its annual budgets and plans.

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Additional long-term advantages of investing in Dividend Kings

Dividend Kings manage to enhance their annual dividend payouts year-after-year, which is more than just an indication that these companies have sufficient earnings and cash flow to support the growing payouts. The decades of rising dividend distribution signal that these companies are dynamic and adapt well to changing market conditions. Effectively navigating the boom-bust business cycle, financial crises, financial bear markets and other obstacles that occur over decades also indicate that these companies are able to withstand challenging market conditions. Any company that manages to weather multiple financial storms and rough markets, while managing to enhance its annual dividends every year, is well-managed and investors can expect sound long-term asset appreciation, as well as a steadily rising dividend income.

Dividend Kings: 50 years of annual dividend boosts

The Dividend Kings is an exclusive group of only 16 companies for 2018. While there are 10 additional companies that have boosted their annual dividends for 50 years or more, only 16 companies meet the additional criteria of minimum market capitalization and inclusion in the S&P 500 Index. To illustrate the selective criteria for Dividend Kings, consider that lowering the minimum number of years for paying dividends to 25 years – as it is for Dividend Aristocrats – expands the list of companies to 53. Further lowering the cut-off by five years to 20 consecutive annual dividend hikes triples the number of companies that meet the criteria to more than 150.

In addition to the Dividend Kings and Dividend Aristocrats designations for the two top-tier groups, some analysts also compile lists of so-called Dividend Achievers or Dividend Challengers – companies with 10 or more years of consecutive dividend hikes. Furthermore, companies with five or more consecutive dividend boosts occasionally carry the Dividend Contenders label.

Dividend Kings: Who are they?

The 29 companies currently designated as Dividend Kings come from nine different market sectors.

The table below provides a full list of the current Dividend Kings and few additional measures, such as share prices – as of closing on December 14, 2020 – annual dividend amounts, dividend yield, dividend payout ratio, etc.

 

Ticker Name Consecutive Annual Dividend Hikes Market Cap Latest Close Price Trailing 12 Month Dividend Yield
ABBV Farmers & Merchants Bancorp 8 $289.92B $163.94 3.44%
ABM 8 $3.03B $45.84 1.70%
ABT 8 $183.79B $105.41 1.78%
AWR 68 $3.61B $97.60 1.56%
BDX 10 $69.77B $246.21 1.41%
BKH 50 $4.57B $70.15 3.44%
CBSH 8 $8.58B $68.43 1.55%
CDUAF 14 $2.68B $26.95 Currency Mismatch
CINF 3 $16.96B $107.87 2.50%
CL 59 $64.41B $77.12 2.41%
CWT 54 $3.50B $63.88 1.57%
DOV 66 $19.79B $141.01 1.43%
EMR 65 $56.27B $95.15 2.17%
FMCB 8 $753.62M $980.00 1.60%
FRT 0 $8.69B $107.01 3.01%
FUL 54 $4.15B $78.05 0.94%
GPC 65 $26.10B $184.92 1.94%
GRC 2 $722.83M $27.70 2.47%
GWW 50 $29.63B $586.45 1.16%
HRL 55 $25.78B $47.19 2.20%
ITW 8 $68.87B $224.19 2.22%
JNJ 59 $300.44B $178.78 2.49%
KMB 47 $46.29B $137.17 3.37%
KO 59 $274.48B $63.47 2.77%
LANC 5 $5.61B $203.77 1.59%
LEG 8 $4.63B $34.92 4.93%
LOW 60 $124.68B $206.18 1.79%
MMM 63 $68.89B $124.63 4.78%
MO 12 $84.57B $47.19 7.71%
MSA 8 $5.45B $139.01 1.31%
MSEX 19 $1.60B $90.46 1.31%
NDSN 41 $13.64B $238.34 0.91%
NFG 8 $5.76B $62.97 2.95%
NWN 66 $1.66B $47.33 4.08%
PEP 50 $252.29B $183.12 2.47%
PG 68 $353.30B $149.09 2.42%
PPG 50 $31.63B $134.59 1.80%
PH 5 $37.61B $292.87 1.71%
SCL 54 $2.48B $111.33 1.23%
SJW 54 $2.41B $79.58 1.81%
SWK 54 $11.63B $78.62 4.04%
TGT 50 $71.32B $154.93 2.56%
TNC 49 $1.19B $64.05 1.58%
TR 8 $1.84B $45.69 0.78%
SYY 45 $43.14B $85.13 2.26%
UVV 51 $1.38B $56.22 5.59%
VFC 1 $11.47B $29.51 6.78%

 

For additional information and research about the Dividend Kings and other companies, you can use tools like the Dividend Screener tool or the Dividend Allstars™ list on Dividendinvestor.com.

Additional considerations

Dividend Kings certainly have impressive records of enhancing annual dividend payouts over long periods. However, a single criterion analysis could provide a false indication. Therefore, investors interested in these companies must also evaluate additional metrics. The lowest dividend yield in the group is currently 0.8%, which is lower than the dividend income investors generally seek. Furthermore, the dividend payout ratios for more than half of the companies currently exceeds the 50% level, which is generally considered as the upper limit for a sustainable payout ratio.

Summary

This list of 29 companies currently designated as Dividend Kings offers an easy way for investors to identify mid-cap and large-cap companies with longstanding annual dividend hikes, as well as a demonstrated capability to provide a steady source of dividend payouts for income-seeking investors. However, interested investors should evaluate the full spectrum of financial metrics, such as share-price trends, price-to-earnings (P/E) ratios, moving averages, dividend payout ratios, etc.

Investing in other equities with higher returns might yield superior performance over shorter periods. However, that strategy generally requires active investor involvement, high-level analytic tools and frequent trading that commonly only active traders and professional investors can afford. Furthermore, high-frequency trading generates additional fees that diminish total returns over extended periods and high-yield equities generally incur added volatility and carry higher risk exposure.

Therefore, investors looking for long-term portfolio growth – especially retirement investors and investors seeking a supplemental source of secondary income who do not have the time and resources to spare for complex analytics and trading – could be best suited to invest in Dividend Kings. These investors could allocate a portion of their portfolio to take a long position in few or all of the Dividend Kings and enjoy long-term asset appreciation and dividend income with just periodic maintenance of their portfolio mix – such as an annual rebalancing.

Investors still can use a portion of their portfolio to seek more speculative investments with higher risk exposure for potentially outsized gains. However, their investment portfolio should be balanced on the other side with long positions in stable companies – such as the Dividend Kings – that provide low-risk, long-term capital growth complemented with steadily rising dividend income payments.

 

Related Articles:

The Dividend Aristocrats List

5 Best Dividend Aristocrats to Buy Now

The Dividend Aristocrats Investing Strategy and Stocks List

The Best Dividend Aristocrats ETFs

Why Invest in the Dividend Aristocrats?

The S&P 500 Dividend Aristocrats — Everything You Need to Know

What are the Dividend Aristocrats?


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Ned-Piplovic

 

Ned Piplovic is the assistant editor of website content at Eagle Financial Publications. He graduated from Columbia University with a Bachelor’s degree in Economics and Philosophy. Prior to joining Eagle, Ned spent 15 years in corporate operations and financial management. Ned writes for www.DividendInvestor.com and www.StockInvestor.com.


 

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