Achieve long-term dividend yields through stock market champions
What are Dividend Aristocrats ?
The distinctive designation Dividend aristocrats receive shares that are distinguished by long-term dividend payments. Experienced investors regard a time span of 25 years and more as longstanding. During this period, a company whose shares belong to the dividend aristocrats must not only have distributed a dividend to its shareholders every year. In addition, the dividend must be increased with each payment, so that a permanent increase of the dividend yield results for the investors. Not many stock corporations meet these high requirements. In Germany alone, around 15,000 companies operate in the legal form of public limited companies, and there are a large number of listed companies worldwide.
Most of the known dividends aristocrats come from the USA. For example, the companies Coca Cola, Johnson & Johnson, McDonalds, Caterpillar, Procter & Gamble, Nike, Colgate Palmolive, Wal Mart and the energy group Conoco Phillips have been successful for many years and pay their shareholders a higher dividend each year. In Germany, only the Fresenius health care group with the shares of Fresenius AG and Fresenius Medical Care and the mineral oil group Fuchs Petrolub belong to the selected group of stock corporations that enjoy their shareholders every year with an increased dividend. Besides dividends aristocrats, only High Yield Dividend Shares offer a similarly high dividend yield, albeit with a different investment strategy and higher risk for investors.
Why Investors should invest in Dividend Aristocrats?
A well sorted portfolio is part of the investment strategy successful investors. In order to build up assets in the long term, there should therefore also be stocks in the portfolio that the investor can hold in his portfolio for a long time without daily observation. In addition the shares of renowned enterprises, which distinguish themselves for decades by a successful business policy and a good dividend yield, count. Global corporations such as Coca Cola or the 3M Company, which among other things produces the well-known Post-it stickers, can also crisis times to cope and still increase their dividend. The investors invest their money in a healthy and economically strong company with an experienced and successful management. Even if past figures are no guarantee for a profitable future, shareholders can rely on the managing directors to direct all their knowledge and experience towards steering the company well through times of crisis.
Many dividends are aristocrats Consumer shares well-known manufacturers of cleaning products, body care products or food. If a brand has been on the market for a long time and is popular with consumers, the products sell well and investors can enjoy regular dividends. Both Consumer Shares and dividends Aristocrats are well suited to build up wealth over the long term and achieve passive income over the long term. Therefore these shares represent a recommendable component of the personal retirement plan. The legal pension provides for a financial gap with the insured ones, which can be balanced by the income from the share depot.
Investors should pay attention to this
There is no uniform definition of when a stock belongs to the dividend aristocrats. For some investors it is sufficient if a company has paid a higher dividend each year in the last five to ten years. Other investors only accept a regular payout in the last 25 years or longer to count a paper among the true aristocrats. The shares of the successful companies are characterized by an annual increase in the dividend, which can be five percent or even much higher for some companies. Particularly in low-interest phases, hardly any other financial investment available on the financial market offers such an interest rate.
However, investors must consider how the corporation raises the money for dividend payments. The company's business must have been so successful in the past financial year that the distributions can only be made from the earned profit. The investors should exactly observe a company, which must take up a credit for the dividends or uses up their reserves, in order to satisfy the shareholders. Once the substance of a company is attacked by the withdrawal, experienced traders often decide to sell their shares and replace them with other dividends aristocrats. Also an admixture of Dividend Funds is conceivable in order to diversify a portfolio and spread the risk of the investment.
Dividend Aristocrats as signal generators
companies whose shares are among the dividend aristocrats are characterised by sound management and a stable financial position. If such a company suddenly announces to lower or even completely suspend the dividend, the investors should become attentive. It is worthwhile itself a exact investigation of the division, in which the enterprise concerned is active. If it appears that the corporation is in economic difficulties, the shares should be sold immediately. At the same time, the investor should observe the entire industry. If it is the crisis of a complete business division, other companies whose shares are also in the investor's custody account may also be affected. In this case, it may be worthwhile to regroup the securities or purchase Dividend ETF's. These exchange-traded funds often perform well and are characterised by their low cost.
Many banks and brokers offer a free sample deposit with a virtual credit. If an investor uses such a depot for market observation or for the security of its investments, also some dividend aristocrats should be in it. Large price fluctuations of these renowned shares are a clear warning signal for a volatile market, with which the prices can change in short time. Here the attention of the investors is demanded, in order to react fast and by appropriate purchases and sales losses to avoid.