Introducing the 17 "Dividend Aristocrats" of the ASX

Financial markets have been increasingly pricing in the risk of a prolonged downturn. In these times, it's often said that quality companies with defensive earnings profiles will survive the turmoil better than their cyclical and growth-oriented counterparts. In his weekly markets note to clients, Citigroup's David Bailin argued the case for why yield is the definitive play for 2023 (and of the year prior as well). 

"We have focused our asset allocation strategy to seek to earn as much yield as possible from quality bonds and dividend-paying equities."

With an Australian three-year bond now fetching 3% and some term deposits offering 4.5%, the search for income has suddenly become back in vogue. And of course there are the income investors' favourite stocks like the banks, industrials. 

But not all income stocks are made equal and not many are consistent winners in the long-term. Hence why investors have a special term for those companies that make long-term dividend growth both an aim and a reality - Dividend Aristocrats.

In this wire, we'll discuss the concept of dividend aristocrats and share with you the results of a recent experiment. 

But first, an explanation

If you're a long-time reader of Livewire, you may have actually worked out that this isn't the first time we've discussed this topic. Our colleague Glenn Freeman wrote a piece on Dividend Aristocrats two years ago. In case you missed it, he introduced you to the US definition of a Dividend Aristocrat:

A dividend aristocrat is a company in the S&P 500 index that not only consistently pays a dividend to shareholders but annually increases the size of its payout. A company will be considered a dividend aristocrat if it raises its dividends consistently for at least the past 25 years. (Investopedia)

There are other factors as well, including a company's market capitalisation and the liquidity of its stock. But it's essentially what it says on the tin. 

As of 31 March 2023, there are 66 constituents of the US Dividend Aristocrats Index (yes, there is such a thing). The index, which is equal-weighted, has returned just over 9% in the past 10 years. While it's no Amazon (NASDAQ: AMZN), it stands out as a solid and consistent performer in comparison to other names like Rivian (NASDAQ: RIVN), Snap (NASDAQ: SNAP), and Lyft (NASDAQ: LYFT). 

How many ASX Dividend Aristocrats are there?

Here is where we burst your bubble a little. If we took the literal definition provided by Investopedia, the answer is actually zero. The longest winning streak currently on the ASX 200 is held by four companies that each have 19 consecutive years under their belts. 

In total, 17 companies have increased their nominal dividend year-on-year for at least 10 straight years. For the purposes of this wire, we have lowered the bar to become a Dividend Aristocrat to 10 from 25 years. But we have kept the 'streak' part of the definition - that is, you had to have increased your dividend during the COVID-19 pandemic in order to qualify. 

We could have included more companies but felt that this would disrespect the companies that were able to consistently grow, despite a global health crisis.

The 17 companies are:

This table is accurate as of 19 April 2023 and obviously changes every six months as dividends are reassessed and paid out. (Source: Market Index, Norgate Data)

Honourable mentions

It needs to be noted that this list would have been longer if the COVID-19 pandemic hadn't occurred. For instance, EVT Limited (ASX: EVT) and Ramsay Health Care (ASX: RHC) both had 16-year streaks coming into 2020. AGL Energy (ASX: AGL) had a 12-year streak and at least 12 other companies had 10 years of consecutive growth prior to 2020. 

If only COVID had not happened...

"Quality" companies in a chart

To the non-income-oriented investor, you might think these names are not good for much more than holding onto the dividend. But as this 10-year performance chart actually shows, all but two of the 17 names have actually outperformed the wider ASX 200. 

Remember, none of the Big Five banks or the three largest iron ore miners are on this list. 

With grateful thanks to Kerry Sun for his help in conducting the data scan and number crunching for this piece. If you liked this piece, make sure you're subscribed to his profile and The Morning Wrap.

Glenn's piece from two years ago covers these same things but he approached it in a different way. To read that piece, click here:

Note: An earlier version of this piece said the data set is based on company dividend yield. The data set is actually based on total paid dividends. The story has been corrected.