Dividend Aristocrats Performance in 2019 and 2020

The list of Dividend Aristocrats works like a bible for dividend investors. It is a starting point for a lot of beginners, as well as a classic textbook that you will go back to check from time to time even you have gained more experience from the market. At the same time, the list of Dividend Aristocrats keeps updated (refer to the page of Wikipedia). By examining this list, you can gain some ideas as to the big picture of how well your portfolio is performing and furthermore as to what stocks to buy or sell.

However, often I find it difficult to go through stocks individually by looking at its yields, dividend growths, and price appreciations. While it is important to do the due diligence going through all these numbers, it is not easy to grasp a sense of the big picture regarding how all these stock perform when comparing one versus another across different time points (e.g., within a year and across different years). For sure, there are no absolute answers with respect to which one is the best, but I always find it helpful when we can pull something together into a figure since we generally prefer visual information (i.e., figures or videos) to its verbal counterpart (i.e., numbers and words). This leads to the present article, and by plotting from different angles I will look at how these Dividend Aristocrats stocks perform in last year as well as this year so far.

Before diving into detailed analyses that I will present, I need to make it clear regarding the purposes of this article. First, I acknowledge that dividend investors typically care more about dividend yield and dividend growth compared to price appreciation, and the value of dividend stocks is to provide a reliable source of income rather than a short term return through buy and sell. However, I believe we can still gain insights when combining dividend yield and price appreciation into the same framework, providing guidance for some investors who want to evaluate total returns. Second, the analyses provided here are based on the data in 2019 and 2020. Ideally, it would be better to examine within a longer time window to gain a broader picture, and thus such a short-term time framework is the limitation of this article. Hopefully, such limitations will be addressed by other people or my analysis in the future.

Part 1 : Year of 2019

I calculated the dividend yield and price appreciation of all the Aristocrats in 2019 and did a plot below. Note that, for the details of how I did these analyses, please refer to my other post. Amcor (AMCR) is not included into the analysis of this article because of the merger between Bemis and Amcor in 2019. Not surprisingly, Altria (MO) has the highest dividend among all the dividend Aristocrats. The second highest one is ATT (T), with an annual average dividend of 6.06% in 2019. Interestingly, Target (TGT) stands out because of its high price appreciation. It is worth noting that there is an obvious negative relationship between stock price appreciation and dividend yield. Of course, such relationship is generally true, regardless of the year and the category of the stocks.

So far, it is not clear what the total return each stock had in 2019, namely the combination of dividend yield and price appreciation. To more intuitively understand this, I used the closing price on Jan. 02 2019 as the cost to calculate the total return of 2019. Quite often, we want to get a sense of how these Dividend Aristocrats perform when compared with other stocks. Since Dividend Aristocrats are a part of SP500, I use the Vanguard S&P 500 ETF 2019 as the benchmark and the representative of the broader market here to get a sense of how the comparison looks like. VOO has a dividend of 5.57 in 2019 and the total return is 31.04%. To put it into the perspective, I added a blue line represents the return of VOO. There are 26 out of 65 Dividend Aristocrats outperformed VOO in 2019. On a side note, it is interesting to see that T did better than VOO in 2019.

Part 2: Jan. 02 to Apr. 15 in 2020

Dividend Aristocrats have a reputation for performing better than others in a rainy day. Given the Covid-19 virus and the closure of business, 2020 so far is a perfect time window to examine whether that is the case. Given that 2020 is still going, this part does not include dividends, and only with price appreciation. Because of the Covid-19 virus, Clorox (CLX) has gained the most since the January 2020 among all the Dividend Aristocrats based on the criterion of price appreciation. Interestingly, you can see that Clorox was at the bottom in the 2019 chart. We can clearly see that firms providing basic consumer products have gained more returns, as the stocks with the top two returns are Clorox (CLX) and Hormel (HRL). If I added the 2019 dividends into the calculation, the ticker order basically stays the same as the price-appreciation-only chart below.

27 out of 65 performed better than VOO from Jan. 02 to Apr. 15 in 2020, and we can conclude that such a proportion is basically the same as in 2019 (26/65). Given that Dividend Aristocrats are part of SP 500, it is not clear the difference between Aristocrats vs. Non-Aristocrats. That is, is there a difference between Aristocrats vs. Non-Aristocrats regarding price appreciation in 2020 so far?

Part 3

Given that the analysis here spans a longer period, I focuses on stock returns based on adjusted close prices. For the detailed calculation process, please refer to my other post. For the first figure below, the starting point is 2015. That is, assume that you invest the same amount of money in three different categories of stocks, namely (1) No Dividends, (2) Dividend Non-Aristocrats, and (3) Dividend Aristocrats. Conditional on this starting point in 2015 and moving forward, stocks without dividends have high returns than Dividend Non-aristocrats and Aristocrats. Given that it is difficult to see clearly regarding the comparison of these three groups in the year of 2020, I added an additional figure to zoom into the year 2020. Note that, while this figure only shows 2020, the starting point is the same as the first figure, namely from 2015.

Figure Credit: Dividend Science
Figure Credit: Dividend Science

As discussed above, given that dividend aristocrats may weather bear markets, it would be of interest to examine whether dividend aristocrats can perform better among the current Covid-19 crisis. To explore this, we need to reset the starting clock to Jan. 2020 and the figure below shows that Dividend Aristocrats had a little more return as of April 15 this year. However, Dividend Aristocrats still did not perform better than No-Dividend stocks.


To conclude, within the dividend aristocrats, parts 1 and 2 reveal there is a difference between 2019 and 2020 regarding the best performing stocks. Quite a few of the best performing stocks in 2019 were in the industrial sector, such as Dover (DOV), Cintas (CTAS), Air Products and Chemicals (APD), and Illinois Tool Works Inc (ITW). In contrast, Covid-19 has changed the business dynamics, and stocks related to consumer staples have performed better than industrial ones in 2020 so far.

Further, comparing Dividend versus No-Dividend stocks, stocks without dividends performed better than dividend ones, regardless of Aristocrats or not. Examining at a more micro level, Dividend Aristocrats performed slightly better than Dividend Non-Aristocrats in 2020. Even you are pessimistic about the stock market overall given the current situation, investing on No-Dividend stocks within SP500 is still a much better choice, unless you care more about dividends (e.g., need dividend cash). Dividend stocks’ underperformance can be partially due to the fact that tech stocks within SP500 (e.g., Amazon, Netflix, Microsoft, and Tesla) have been doing very well in the last few years. Thus, when setting the starting point at 2015, dividend stocks just could not keep up with the Joneses. To summarize, the nuance and the bigger story here are not about dividends or not or how long a stock pays dividends, but rather the fact of tech stocks representing the future and stock investment is always forward-looking.

Note: For the calculation process and details, please refer to my posts here and here.

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