As we welcome a New Year, it’s time for my annual Year In Review of the Dividend Aristocrats. Here are the major events and best and worst performances of these well-known dividend growth companies from 2016.
It was the year of the acquisition and spinoff for the Dividend Aristocrats and dividend growth stocks in general. We started 2016 with 50 Dividend Aristocrats and we’ll lose one company due to an acquisition and another due to a spinoff that ended up resulting in a dividend cut.
Acquisitions Were Popular Among DG Stocks
In January, dividend growth stock ACE Limited closed on their acquisition of Aristocrat The Chubb Corporation. The combined company retained Chubb’s ticker symbol (CB) and renamed itself Chubb Limited. While Chubb Limited retained ACE’s 23-year dividend growth history that still meant that Chubb fell off the list of Dividend Aristocrats. However, Chubb is on track to rejoin the Dividend Aristocrats index at the beginning of 2019.
Aristocrat Sherwin Williams (SHW) announced in March that it would be acquiring paint and coloring company Valspar (VAL). Valspar’s 39-year dividend growth history is actually a little longer than Sherwin Williams, but that didn’t stop Sherwin Williams from offering a 40% premium for Valspar stock. The deal is expected to close in the first quarter of 2017.
Other dividend growth companies that participated in acquisitions included Questar, which was purchased by Dominion Resources (D) and Linear Technology Corporation (LLTC), which was purchased by Analog Devices (ADI). The Questar deal closed in September; Linear Technology will continue to trade as an independent company until that deal closes in the first half of 2017.
Specialty chemical company Praxair (PX) announced its intent to merge with German chemical supplier Linde. Praxair will take the Linde name and the new company will move its tax headquarters to Germany. Right now, it isn’t clear if the company will continue to increase dividends each year – Praxair has grown dividends since its spinoff from Union Carbide in 1992 and would be eligible to become a Dividend Aristocrat at the beginning of 2018.
Two Spinoffs From the Aristocrats – and One Dividend Cut
In November, REIT HCP (HCP) spun off its HCP ManorCare skilled nursing facilities into a new company – Quality Care Properties (QCP). Along with the spinoff came a 35% dividend cut from an annualized rate of $2.30 to $1.48. Given that Quality Care Properties is not intending to pay a dividend for the foreseeable future, it’s likely that HCP will be removed from the Dividend Aristocrats index at the end of January.
Another spinoff that occurred was that of Versum Materials (VSM) from Air Products. Versum provides specialty chemicals for the electronics manufacturing industry. Air Products grew its dividend 6.2% this year, increasing its dividend growth streak to 34 years.
Two Steps Back and One Step Forward
Offsetting the loss of Chubb and HCP from the Aristocrats index is the newest Dividend Aristocrat – General Dynamics (GD). The aerospace and defense giant completed its 25th year of dividend growth in 2016 so when S&P reexamines the list of Aristocrats at the end of January, General Dynamics should get added. (You can read my article on General Dynamics becoming an Aristocrat at SeekingAlpha.com.) This brings the total number of companies in the S&P 500 Dividend Aristocrats index to 49.
An Administrative Name Change
In what I would call an administrative change, publisher and owner of the S&P brand McGraw-Hill Financial changed its name to S&P Global (SPGI). It also changed its ticker symbol from MHFI.
A Much Improved Year Over 2015
It was a good year for the S&P 500 index – the SPY ETF was up 12%, excluding the effects of dividends. The Dividend Aristocrats ETF (NOBL) performed nearly as well as the S&P 500 this past year and was up 11.65%. This was after a flat 2015 for both the S&P 500 and Dividend Aristocrats indices.
Best and Worst Performing Dividend Aristocrats
Despite the nice performance of the SPY ETF (SPY), it ended right in the middle of the individual Dividend Aristocrat components. 24 Aristocrats beat the S&P 500 performance, while 26 under performed the S&P 500. The 5 Aristocrats with the best performance in 2016 were:
- Nucor (NUE) (up 52.18% in 2016)
- Sysco (SYY) (38.76%)
- Chevron (CVX) (36.66%)
- Illinois Tool Works (ITW) (35.03%)
- Cincinnati Financial (CINF) (31.54%)
Only 13 of the 50 Aristocrats ended down on the year; the 5 worst performing Aristocrats were:
- Cardinal Health (CAH) (down 18.04% in 2016)
- Abbott (ABT) (-12.32%)
- F. Corporation (VFC) (-12.11%)
- Hormel Foods (HRL) (-10.62%)
- HCP, Inc. (HCP) (-9.45%)
Highest & Lowest Yielding Dividend Aristocrats
The S&P 500 index, using the S&P Depository Receipt ETF (SPY) as a proxy, ended 2016 yielding 2.03%, slightly higher than NOBL’s 1.91% and higher than just 13 of the 50 Aristocrats.
At the end of 2016, here are the 5 highest yielding Aristocrats:
- HCP, Inc. (HCP) (4.98%)
- AT&T (T) (4.61%)
- AbbVie (ABBV) (4.09%)
- Chevron (CVX) (3.67%)
- Consolidated Edison (ED) (3.64%)
…and the 5 lowest yielding Aristocrats:
- R. Bard (BCR) (0.46%)
- Cintas Corporation (CTAS) (0.91%)
- The Sherwin Williams Company (SHW) (1.25%)
- Ecolab (ECL) (1.26%)
- S&P Global (SPGI) (1.34%)
The largest dividend increases this year came from Cintas (CTAS), with a 26.7% increase, closely followed by Sherwin Williams (25.4%) and Lowe’s Companies (LOW) (25.0%). Like last year, the smallest dividend increases came from metal company Nucor (NUE), with a 0.7% increase, and energy giant Chevron (CVX), with a 0.9% increase.
You can view the complete list of current Dividend Aristocrats, and sort on their 2016 performance, end-of-year yield and 2016 dividend increase in this post.