Dividend Kings and Dividend Aristocrats

Before analyzing these two groups, we should start by defining what they are and how they differ. For a company to be a dividend aristocrat, it must be a member of the S&P 500 and have an increasing dividend payout over 25 years or more. To qualify as a dividend king a company must only meet one hurdle: paying an increasing dividend consistently for at least 50 years. Currently, there are 68 companies on the Dividend Aristocrat list and 54 companies on the Dividend King list. There is some overlap as a few companies are on both lists. Either way, when you consider there are over 10,000 publicly traded companies on the various markets, to make either of these lists is an enormous accomplishment. So, for income investors, the question naturally arises: Are dividend kings and aristocrats a good way to monetize your portfolio? To answer this question, let’s look at the current yield of both lists. The current distribution yield of the Proshares S&P 500 Dividend Aristocrats ETF (symbol NOBL) is 2.10%. While no ETFs track the Dividend King list, the average distribution yield of the 54 companies currently on the list is only slightly better at 2.8%.

Now let’s take these figures and plug them into a hypothetical $1 million portfolio. If the portfolio was invested in the Dividend Aristocrats list, it would initially generate $21,000 a year in dividends. If the portfolio was invested in the Dividend Kings list, it would initially generate $28,000 a year in dividends. Let’s assume our hypothetical investor has an income goal of $100,000 a year when he retires. For the sake of brevity, we will assume our investor chooses the Dividend Kings list, as it has a higher yield. To generate $100,000 a year from a portfolio yielding 2.8%, he would need $3,571,428. By compounding his dividends at 2.8%, it would take our investor over 46 years to reach his income goal. Now let’s compare that to the Fly High Investing portfolio.

The Fly High Investing portfolio has averaged 12.4% over the fund’s life. Let’s take that figure and plug it into the same hypothetical $1 million portfolio. If the portfolio was invested in the Fly High Investing stocks, it would initially generate $124,000. Remember, our hypothetical investor has an income goal of $100,000 a year. So instead of waiting 46 years, he can retire immediately and have an income stream $24,000 more than his income goal. But let’s assume our investor doesn’t want to retire immediately and wants to work for 46 more years. By compounding his dividends at 12.4%, after 46 years his portfolio would generate $26, 833,172 a year in dividend income. So, to answer the original question, are Dividend Kings a good way to monetize your portfolio, I would like to offer a hint: Would you rather have $100,000 a year or $26,833,172 a year in income? How you answer that question will determine your answer to the original question. For more information go to FlyHighInvesting.com to learn more and get on your path to a life of financial freedom.