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Dividend Kings are a distinguished group of companies on Wall Street that have consistently raised their dividends for at least 50 consecutive years.
In this article, we will delve into the criteria that define a company as a Dividend King, how they differ from Dividend Aristocrats, and why they may be worth considering for your investment portfolio.
What are Dividend Kings?
Dividend Kings are the cream of the crop when it comes to dividend-paying companies. These companies have demonstrated a consistent pattern of increasing their dividend payments every year for a minimum of five decades, showcasing their financial stability and resilience even in challenging economic climates. As of 2024, there were 53 companies that held the prestigious title of being a Dividend King.
Criteria to become a Dividend King
The primary criterion for being classified as a Dividend King is a consistent track record of dividend hikes for at least 50 consecutive years. This not only highlights a company’s dedication to enhancing shareholder value but also signifies the company’s ability to adapt and thrive over time.
Dividend Kings vs. Dividend Aristocrats
While both Dividend Kings and Dividend Aristocrats are esteemed groups of companies known for their long-standing history of increasing dividends, there are notable distinctions between them.
While Dividend Aristocrats must have raised their dividends for a minimum of 25 years and meet specific criteria such as being part of the S&P 500 index, Dividend Kings must have a track record of 50 years of uninterrupted dividend growth, with no requirements regarding S&P 500 membership or market capitalization.
Both categories offer investors a sense of reliability and potential for steady income, with Dividend Kings, due to their lengthier track record, potentially offering an even greater sense of stability to investors.
2024 Dividend Kings List
As of 2024, the Dividend Kings list comprises only 53 companies. While many of these companies may not be immediately recognizable, they have a long history of providing attractive dividends.
Here are the top 10 Dividend King stocks ranked by their dividend yield as of June 2024:
- Altria Group Inc. (MO): 8.4%
- Universal Corp. (UVV): 6.8%
- Canadian Utilities (CDUAF): 6%
- Northwest Natural Gas Holding Co. (NWN): 5.5%
- Black Hills Corporation (BKH): 4.9%
- United Bankshares (UBSI): 4.7%
- Fortis (FTS): 4.5%
- Federal Realty Investment Trust (FRT): 4.4%
- Kenvue (KVUE): 4.3%
- Stanley Black & Decker (SWK): 4%
These companies represent a diverse array of industries, demonstrating that consistent dividend growth can be achieved across various sectors.
Changes in the Dividend Kings List in 2024
The 2024 Dividend Kings list saw the addition of several new companies that joined the ranks, including Archer Daniels Midland (ADM), Consolidated Edison (ED), Fortis (FTS), Kenvue (KVUE), and United Bankshares (UBSI). However, the list also witnessed the removal of two former Dividend Kings that had to reduce their payouts: Leggett & Platt and 3M.
How to Invest in Dividend Stocks
While the allure of dividend yield may be strong, successful stock investing necessitates thorough research. Factors such as analyzing the industry, the company’s competitive advantage, and its financial well-being are essential considerations.
Investors can opt for dividend stocks that offer a consistent income stream immediately or focus on companies with a history of increasing their dividend payments over time. While growth-oriented stocks may initially provide lower yields, they have the potential for significant dividend growth in the long run, sometimes reaching 9 or 10% over many years.
Dividend stocks are also regarded as one of the best investments for compound interest. Not only can the underlying asset appreciate in value while paying out dividends, but this investment can also experience compound growth if the payouts are reinvested.
Many companies pay dividends quarterly, with announcements made by the board of directors through press releases or SEC filings. The dividends are then deposited directly into the investor’s brokerage account.
On the ex-dividend date, the stock price typically decreases by the amount of the dividend to reflect that new buyers will not receive it. The dividend itself is credited to the investor’s account on a separate payment date, which may occur days or weeks later.
Dividends received are generally considered taxable income, even if they are reinvested back into the same investment. However, if the investment is held in a tax-advantaged account like an IRA or 401(k), dividends can grow tax-deferred.
Should You Invest in Dividend King Stocks?
Dividend Kings can serve as a fundamental component of a diversified investment portfolio. Dividend stocks, in general, are viewed as one of the top long-term investments. With their extensive history of consistent dividend increases, Dividend Kings specifically represent mature, relatively stable companies with resilient business models that have withstood the test of time.
However, like any investment, Dividend Kings are not without risks.
While these companies boast a strong track record, future performance is never guaranteed. Economic downturns or shifts in industry trends can impact a company’s ability to sustain dividend growth. Investors should always conduct their own due diligence before making investment decisions.
Ultimately, Dividend Kings should be balanced with other investments in a diversified portfolio to mitigate risks.
Bottom Line
Dividend Kings represent an exclusive group of companies renowned for their impressive history of dividend growth spanning 50 years or more. These stocks can provide a reliable income stream and serve as a component of a well-rounded investment portfolio. Remember, past performance does not guarantee future results, and all investments carry inherent risks. However, with a well-informed and balanced approach, Dividend Kings can be a valuable addition to your investment portfolio.
Editorial Disclaimer: It is recommended that all investors conduct their own independent research into investment strategies before making any investment decisions. Additionally, investors should be aware that past performance of investment products does not guarantee future price appreciation.