The one most critical aspect about dividend aristocrat (that I have been fan of) is increasing the annual dividend consistently for 25 years consecutively. This has been a cornerstone for any company to be known as dividend aristocrat. In last one year or so, the global economic environment is driving most of these aristocrat companies to slash/cut/freeze their dividends. Suffice to say the total number of dividend aristocrats is shrinking. This has resulted in business media and blog-o-sphere debating about the need to change the standard that defines dividend aristocrat index. The S&P index committee has also indicated that it may consider relaxing certain standards required to qualify for aristocrat index. One school of thought says S&P should reduce the number of years of continued dividend increases.
In its recent update, S&P reported that dividends paid by companies in S&P500 index reduced by approximately 15% (for first quarter of this fiscal year). This actually captures the whole gamut of companies that are above average, average, and below average. While I do agree that there has been reduction in dividends payments, I do not believe this is right parameter to demonstrate strain on dividends. One cannot compare a bunch of the good, the bad, and the ugly (index), with the bunch of the exemplary (aristocrat). Division I teams do not play with Division III in the league. League is among equals. continue reading rest of the article….