We first wrote about the VectorVest Dividend Aristocrats in our weekly Essay on 19 June 2020. You may recall that Dividend Aristocrats are stocks that have increased their dividends year in and year out over the last 10 years or longer.

On 31 December 2021, we published a follow up weekly Essay titled “Enhanced: Dividend Aristocrats” and created a Trading System using the Enhanced Dividend Aristocrats WatchList that we setup. You can access the Enhanced Dividend Aristocrats Trading System by going to VectorVest Australia, click on the Viewers tab and then click on Trading System Viewer.

This Trading System finds stocks that have increased their dividends on average each year for at least the last 10 years. To see the stocks in the WatchList that this Trading System uses, click on the Viewers tab and then select WatchList Viewer. Then click on the Overview WatchList folder and select the Dividend Aristocrats WatchList. As of June 2024, this WatchList has been revised to 16 stocks.

To see the overall WatchList performance in graph format, right click anywhere on the WatchList Average line (bottom of your screen) and select: View WatchList Average Graph. Go to the bottom right of your screen and set the time to 10 years. Then click on Add Parameter, then on Dividend Analysis and then select: Div (Dividend Paid). The 10-year graph is as follows:

The 16 stocks identified in the revised Dividend Aristocrat WatchList have collectively had steadily rising dividends year in and year out (apart from 2020) over the last 10 years.

How does a company keep growing its dividends? Earnings! Rising earnings ensure a company can afford to keep growing their dividends. Put Earnings on your graph (use Add Parameter under the Capital Appreciation selection). Note the correlation between EPS, DIV and Price of the Dividend Aristocrats.

The average annual Dividend Yield is currently around 1.79%. Most of these dividend paying stocks are fully franked which takes the grossed-up dividend yield to over 2%.

Besides sustainable dividend yield, investors also look for sustainable capital growth. Since the beginning of 2024, the revised Dividend Aristocrats WatchList has returned capital growth of over 14% (2 January 2024 through to 11 June 2024). In recent days (3 June 2024 through to 11 June 2024) the Dividend Aristocrats WatchList has returned over 2%, outperforming the Price of the VVC/AU which tracks the average of all the stocks in VectorVest.

Run through the revised Dividend Aristocrats WatchList from which the Enhanced Dividend Aristocrats Trading System draws its stocks, and graph Price, DIV and EPS. How do these stocks stack up against the dividend stocks you currently hold?

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VectorVest Inc (ARBN 654 498 218) and Russell Markham are Authorised Representatives (No. 1294036 and No 1294037) of Centra Wealth Pty Ltd (ABN 39 158 802 450) which holds an Australian Financial Services License (AFSL No. 422704). Please refer to our Financial Services Guide which provides you with information about us and services we can provide. Any advice is general in nature and has not considered your personal objectives, financial situations or needs. You should consider whether the advice is suitable for you and your personal circumstances. Backtest results and Model Portfolio performance and profit calculations are theoretical and calculated by VectorVest Inc and do not reflect actual investments in the companies mentioned. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. Actual results may be affected by known or unknown risks and uncertainties that cannot be reasonably included in a backtest, and therefore these outcomes can differ materially from backtested expectations. As a result, past performance should not be relied on as a guarantee for future results.
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