Dividend investing is now a popular option for investors looking for regular income and longer-term financial security. The concept of dividend income is very straightforward i.e. put your money into company by buying shares and the company shares a percentage of the profits they earn with you and other shareholders via regular dividend payouts. Those investors who are looking regular and reliable stream of income, dividend investing is tailormade strategy for them. These dividends when reinvested, could significantly increase the returns over time by compounding.
What makes dividend-paying stocks stand out is their ability to offer both stability and income. Companies with a long track record of paying and more importantly, increasing dividends tend to be financially sound and well-managed. They’ve frequently proven their worth even during economically tough times while continuing to pay dividends to its shareholders. Here in this blog post we are going to discuss about two elite dividend paying groups i.e. Dividend Aristocrats and Dividend Kings. Companies that comes under this list are worth to invest, as they have been paying dividends consistently for the last decade or more. Without further ado lets dive into the topic to know more about “Dividend Aristocrats and Dividend Kings”.
What Are Dividend Aristocrats?
Dividend Aristocrats are a highly regarded group of companies that are known for rewarding its shareholders regularly through dividends. To make it onto this list, a company must increase its dividend payouts for at minimum the last 25 years. This commitment to increase dividends is a sign of the strength of its finances, stability as well as a favorable attitude toward shareholders.
For a company to come under “Dividend Aristocrat” list it has to meet few other criteria apart from paying dividends consistently. Below are the set of rules which a company must satisfy to be in the elite group of “Dividend Aristocrat”.
- Company must be a part of the S&P 500 index, which means it’s one of the biggest publicly traded companies across the U.S.
- Minimum market capitalization of three billion.
- The stock must be a high trading and liquidity one, so that for investors should not face any issue while purchasing and selling the shares.
- Company must show or have the history of increasing dividends over at least 25 consecutive years.
These rules assure that Dividend Aristocrats aren’t just consistent payees but also big, stable and financially sound enterprises.
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What Are Dividend Kings?
Dividend Kings, the name itself clearly explains the stocks that come under this group are “King of dividend paying companies”. They have shown profitability and consistency in their fiscal discipline through increasing their dividend payouts each year for 50 years or more. Paying dividends consistently is not an easy thing and if companies show such consistency during economic booms, recessions , wars, inflation, market crashes in paying dividends, they are really true gems in the stock market and a group of such companies are coined as “Dividend Kings”.
It is an extraordinary feat that is a testament to the financial strength of a company as well as a commitment to reward shareholders.
To claim the title of a Dividend King there’s one simple, but firm principle i.e.
The company must have raised its dividend every year for at least 50 consecutive year.
In contrast to Dividend Aristocrats that are required to be part of S&P 500 and satisfy certain requirements like market capitalization etc. Dividend Kings don’t need to adhere to those requirements.
However, the majority of Dividend Kings are big, well established companies with solid brands and have an international presence.
The idea of investing into Dividend Kings is typically regarded as an reliable and safe method particularly for those seeking to create an income stream that is passive or to protect their wealth over the course of time. With their proven track record and solid financials, Dividend Kings represent the kind of consistent, long-term growth that investors who are patient appreciate.
Summary : Hope we have given clear inputs on dividend investing and the major difference between Dividend Kings and Dividend Aristocrats. If we have missed out any important information on dividend investing, please do let us know in the comments section.
