Standard and Poor’s (S&P) analyzes their top-performing blue-chip stocks each year to provide a list of S&P 500 Dividend Aristocrat stocks. To qualify for this list (See safe dividend list), the company must be part of the S&P 500 and have dividends that have consistently increased for at least the last twenty-five years. As of June 30, 2010, the S&P 500’s Dividend Aristocrat Index has a one year return of 23.02%.
Building Passive Income
If you’re building a stock portfolio that will provide you with passive income, you can generally depend on these high-performing dividend stocks to continue paying monthly or quarterly payments. Not only can you depend on the checks to keep coming, you can also expect them to increase each year. This feature makes the Dividend Aristocrat stocks a good way to protect your investment from inflation. In addition to the dividend payments, the price of these stocks remains stable compared to other options. Over time, the dividends will pay for your initial investment, and you will still have the original stock available for sale if the need arises.
Build Your Portfolio by Reinvesting the Dividends
If the stock you are adding to your investment portfolio offers a reinvestment plan, and you don’t need the passive income for living expenses, it would be a smart idea to take advantage of the offer. As your dividend payments are reinvested in the original stock, your number of shares will increase each quarter. Because this doesn’t require an out-of-pocket investment, it’s a painless way to build your asset base. If you decide that your dividends have grown to the point that they could pay for your living expenses, and you would like to stop working, you can opt out of the plan and live the good life courtesy of your high-paying Dividend Aristocrats.
Feel Secure with Stocks that are Household Names
You may have never heard the term Dividend Aristocrats, but you will certainly have heard of the companies that make up this S&P index. In 2010, almost fifty well-known companies are included in the S&P 500 Dividend Aristocrat Index.