Dividend Aristocrats vs. Dividend Kings: Comparing Long-Term Dividend Track Records

When it comes to investing in dividend stocks, there are two widely popular terms you may come across- Dividend Aristocrats and Dividend Kings. Despite having some similarities, there are significant differences between these two types of dividend stocks, which can help investors determine what will fit better into their portfolio.

Dividend Aristocrats are known for having a consistently increasing dividend track record for at least 25 consecutive years. S&P Dow Jones Indices, a global leader in financial market indexing, maintains this particular list with 65 companies as of February 2021. The list actively removes companies that fail to meet the criteria of 25 or more years of uninterrupted dividend growth.

In contrast, Dividend Kings is a group of companies that have raised their dividends for at least 50 consecutive years. This is a comparatively smaller list than that of Dividend Aristocrats, with only 30 stocks as of February 2021. Compared to Dividend Aristocrats, the Dividend Kings list is much more exclusive and prestigious.

When it comes to using these two styles of dividend investing, there are pros and cons to each. For instance, investing in Dividend Aristocrats, which is a much bigger list, offers higher diversification, and hence less risk. On the other hand, Dividend Kings, although exclusive, are more stable and reliable in terms of their growth. Therefore, they can benefit investors looking for lower yields with higher security.

The key essence of investing in either Dividend Aristocrats or Dividend Kings is their long-term dividend track record. This weightage of consistency, on the one hand, assures investors of the company's ability to make payments, and on the other hand, validates the company's capability of generating high and dependable returns.

Despite these variables for distinction, both Dividend Aristocrats and Dividend Kings generally look out for a few similar metrics, including payout ratio, free cash flow, and earnings growth. Additionally, both the Dividend Aristocrats and Dividend Kings lists have a relatively low turnover rate, which shows the stability and security of these companies.

In a nutshell, while Dividend Aristocrats offer more diversification and a relatively higher yield, Dividend Kings focus more on stability and reliability. Regardless of which stocks you pick, both Dividend Aristocrats and Dividend Kings can be a perfect addition to a long-term investment portfolio, especially suitable for those looking for stable passive income and growth.