The Dividend Aristocrats in 2021

Legendary investor George Soros once said, “Good investing should be boring”. But an increase in volatile themes today suggests this maxim has gone ignored by at least some market participants.

From a high level, we can view investments on a spectrum. Volatile assets like cryptocurrencies and SPACs are more on the exciting side of things. The boring side is likely where Dividend Aristocrat stocks lie.

The data above, from Sure Dividend, looks at all 65 Dividend Aristocrats, ranking them by their yield, sector, and years of growth.

What are Dividend Aristocrats?

The U.S. Dividend Aristocrats are a basket of 65 stocks in the S&P 500 index. These companies have been growing their dividend per share consecutively, for a minimum of 25 years.

This is easier said than done, since companies often distribute dividends quarterly. To pay and grow a dividend in the long run implies a business model that can withstand varying economic environments, including setbacks like market crashes.

Though dividend stocks may not carry the same excitement as other investments, studies show that dividends represent over 50% of total S&P 500 market returns.

Search:

Company	Dividend Yield	Years Dividend Grown	Sector
AT&T, Inc.	6.9%	36	Communication Services
Exxon Mobil Corp.	6.1%	38	Energy
Chevron Corp.	5.1%	33	Energy
International Business Machines Corp.	4.9%	25	Technology
Abbvie Inc	4.8%	49	Healthcare
Realty Income Corp.	4.2%	26	Real Estate
People`s United Financial Inc	4.1%	28	Financial Services
Federal Realty Investment Trust	4.0%	53	Real Estate
Consolidated Edison, Inc.	4.0%	47	Utilities
Amcor Plc	3.9%	36	Consumer Cyclical

Showing 1 to 10 of 65 entries

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Numerous companies on this list have brand value that stretches all over the globe—including the likes of McDonald’s, Coca-Cola, and Walmart.

Vast global recognition and branding power is in part why these companies can generate cash flows to pay dividends for decades on end. For instance, 94% of the world population recognizes Coca-Cola’s logo.

Zooming In

The 65 Dividend Aristocrat stocks break down into 11 sectors. Across sectors, Industrials is the most crowded, consisting of 14 companies, with an average yield of 1.6% and a dividend growth duration of 43 years. Popular stocks in this sector include 3M and Caterpillar.

Next is the Consumer Defensive sector, containing 13 companies like Clorox, Target, Pepsi, and Procter & Gamble. The average yield is 2.2%, with an average growing duration of 49 years.

The highest yield by sector belongs to Energy, at 5.5%, but is only made up of only Chevron and Exxon Mobil. Their dividend track record may falter in the years to come, due to transitions away from the oil business. Just last year, Big Oil firms reported record net income losses, and Exxon was booted from the Dow Jones Industrial Average (DJIA).

The Consumer Cyclical sector has been increasing their dividend for an average of 50 years, the longest of any sector. Lowe’s and McDonald’s are involved in this category.

Businesses for Today and Tomorrow

Although the Dividend Aristocrats list is published every year, the companies on the list are a stable bunch, meaning changes are fairly infrequent.

In a market climate in part shaped by low rates and compressed yields in the fixed income space, Dividend Aristocrats might be a particularly attractive alternative for investors with a longer-term outlook.

Source: Who Are the Dividend Aristocrats in 2021?

Billionaire Peter Thiel, a founder of PayPal, has publicly condemned “confiscatory taxes.” He’s been a major funder of one of the most prominent anti-tax political action committees in the country. And he’s bankrolled a group that promotes building floating nations that would impose no compulsory income taxes.

But Thiel doesn’t need a man-made island to avoid paying taxes. He has something just as effective: a Roth individual retirement account.

Over the last 20 years, Thiel has quietly turned his Roth IRA — a humdrum retirement vehicle intended to spur Americans to save for their golden years — into a gargantuan tax-exempt piggy bank, confidential Internal Revenue Service data shows. Using stock deals unavailable to most people, Thiel has taken a retirement account worth less than $2,000 in 1999 and spun it into a $5 billion windfall.

To put that into perspective, here’s how much the average Roth was worth at the end of 2018: $39,108.

And here’s how much $5 billion is: If every one of the 2.3 million people in Houston, Texas, were to deposit $2,000 into a bank today, those accounts still wouldn’t equal what Thiel has in his Roth IRA.

What’s more, as long as Thiel waits to withdraw his money until April 2027, when he is six months shy of his 60th birthday, he will never have to pay a penny of tax on those billions.

[…]

What this secret information reveals is that while most Americans are dutifully paying taxes — chipping in their part to fund the military, highways and safety-net programs — the country’s richest citizens are finding ways to sidestep the tax system.

One of the most surprising of these techniques involves the Roth IRA, which limits most people to contributing just $6,000 each year.

The late Sen. William Roth Jr., a Delaware Republican, pushed through a law establishing the Roth IRA in 1997 to allow “hard-working, middle-class Americans” to stow money away, tax-free, for retirement. The Clinton administration didn’t want to give a fat tax break to wealthy people who were likely to save anyway, so it blocked Americans making more than $110,000 ($160,000 for a couple) per year from using them and capped annual contributions back then at $2,000.

Yet, from the start, a small number of entrepreneurs, like Thiel, made an end run around the rules: Open a Roth with $2,000 or less. Get a sweetheart deal to buy a stake in a startup that has a good chance of one day exploding in value. Pay just fractions of a penny per share, a price low enough to buy huge numbers of shares. Watch as all the gains on that stock — no matter how giant — are shielded from taxes forever, as long as the IRA remains untouched until age 59 and a half. Then use the proceeds, still inside the Roth, to make other investments.

About a decade after the creation of the Roth, Congress made it even easier to turn the accounts into mammoth tax shelters. It allowed everyone — including the very richest Americans — to take money they’d stowed in less favorable traditional retirement accounts and, after paying a one-time tax, shift them to a Roth where their money could grow unchecked by Uncle Sam — a Bermuda-style tax haven right here in the U.S.

[…]

Among this rarefied group, ProPublica found, the term “individual retirement account” has become a misnomer. Rather than a way to build a nest egg for old age, the accounts have morphed into supercharged investment vehicles subsidized by American taxpayers. Ted Weschler, a deputy of Warren Buffett at Berkshire Hathaway, had $264.4 million in his Roth account at the end of 2018. Hedge fund manager Randall Smith, whose Alden Global Capital has gutted newspapers around the country, had $252.6 million in his.

Buffett, one of the richest men in the world and a vocal supporter of higher taxes on the rich, also is making use of a Roth. At the end of 2018, Buffett had $20.2 million in it. Former Renaissance Technologies hedge fund manager Robert Mercer had $31.5 million in his Roth, the records show.

[…]

And thanks to the Roth, Thiel’s fortune is far more vast than even experts in tallying the wealth of the rich believed. In 2019, Forbes put Thiel’s total net worth at just $2.3 billion. That was less than half of what his Roth alone was worth.

Source: Lord of the Roths: How Tech Mogul Peter Thiel Turned a Retirement Account for the Middle Class Into a $5 Billion Tax-Free Piggy Bank — ProPublica

The Wall Street Journal reports: Authorities in the U.K. and Japan took aim at affiliates of Binance Holdings Ltd., the world’s largest cryptocurrency exchange network, in the latest regulatory crackdown on the wildly popular trade in bitcoin and other digital assets. The U.K. Financial Conduct Authority, the country’s lead financial regulator, told consumers Saturday that Binance’s local unit wasn’t permitted to conduct operations related to regulated financial activities…

As of April, Binance operated the largest cryptocurrency exchange in the world by trading volume, allowing tens of billions of dollars of trades to pass through its networks, according to data provider CryptoCompare. It was founded in 2017 and initially based in China, later moving offices to Japan and Malta. It recently said it is a decentralized organization with no headquarters… The FCA move doesn’t ban customers from using Binance completely; U.K. customers can continue to use Binance’s non-U.K. operations for activities the FCA doesn’t directly regulate, such as buying and selling direct holdings in bitcoin.
The Financial Times called the move “one of the most significant moves any global regulator has made against Binance” and “a sign of how regulators are cracking down on the cryptocurrency industry over concerns relating to its potential role in illicit activities such as money laundering and fraud, and over often weak consumer protection.” But more countries are also taking action, Reuters reports: Last month, Bloomberg reported that officials from the U.S. Justice Department and Internal Revenue Service who probe money laundering and tax offences had sought information from individuals with insight into Binance’s business. In April, Germany’s financial regulator BaFin warned the exchange risked being fined for offering digital tokens without an investor prospectus.
And CoinDesk adds: Binance is no longer open for business in Canada’s most populous province, apparently choosing to close shop rather than meet the fate of other cryptocurrency exchanges that have had actions filed against them for allegedly failing to comply with Ontario securities laws.

Source: Regulators Crack Down on Crypto Exchange Binance in UK, Japan, Germany, and Ontario, Canada – Slashdot