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You might already be familiar with U.S. Dividend Aristocrats — stocks from the S&P 500 that have increased dividends for 25 years or more. However, there’s an even more distinguished group known as the Dividend Kings.
In this guide, we’ll explore what sets these stocks apart and discuss their appeal to Canadian investors seeking reliable, long-term returns. I’ll also share some insights into a few Dividend Kings that I think are great for buy-and-hold investors.
What is a Dividend King?
A Dividend King is a standout member of the broader S&P 1500 Composite Index, distinguished by its ability to increase dividends for at least 50 consecutive years.
This elite group of 38 stocks not only provides investors with steady income through dividends but also offers a chance to participate in market gains while experiencing less volatility and smaller drawdowns than the broader market.
These companies have demonstrated exceptional resilience, successfully navigating multiple economic crises — including the 1987 stock market crash, the dot-com bubble, the 2008 financial crisis, and the recent COVID-19 pandemic — without reducing their dividends.
On average, Dividend Kings have a history of increasing their dividends for over 40 years and currently offer an average dividend yield of 2.72%.
For Canadian investors, particularly those using Registered Retirement Savings Plans (RRSPs), these stocks are especially appealing. Dividends from U.S. stocks held within an RRSP are exempt from the 15% foreign withholding tax, making Dividend Kings excellent choices.
The best Dividend Kings
Still, not all Dividend Kings are created equal. I particularly favour five primarily due to their robust characteristics:
- Defensive sectors: Each comes from either the consumer staples or healthcare sectors, which are less sensitive to economic cycles.
- Lower volatility: All have a beta lower than 0.75, indicating they are less volatile than the market overall, which typically has a beta of one.
- Blue-chip status: Each is a mega-cap stock, boasting a market capitalization of at least $200 billion.
Here are my picks:
- Walmart: With a 1.05% dividend yield, Walmart has increased its dividend for 50 consecutive years.
- Abbott Laboratories: Offers a 1.89% dividend yield and has a history of 52 years of dividend increases.
- Coca-Cola: Known for its 2.72% dividend yield and a lengthy 62 years of growing dividends.
- Procter & Gamble: Has a dividend yield of 2.31% and has increased its dividend for 68 years.
- Johnson & Johnson: Stands out with a 3.01% dividend yield and 61 years of dividend increases.
With these stocks, the goal isn’t to snag a bargain but to invest in high-quality assets. While they might command a premium, they’re the kind of stocks I’d feel confident holding and reinvesting dividends in for a long time.
