For income‑oriented investors, few brands are as well known as the Dividend Aristocrats. These are the companies that have increased their dividends for at least 25 consecutive years.
They include household names such as Procter & Gamble, Coca‑Cola and Johnson & Johnson, but the roster has broadened in recent years as industrial groups, utilities and even data‑analytics firm FactSet Research Systems joined the club.
With the S&P 500 setting fresh highs in 2024 and 2025, a recurring question for market participants is whether sticking with this elite group can consistently beat the broader market. The answer depends on the time horizon and the lens through which performance is measured.
Our recent report on how the S&P 500 set fresh highs during early autumn 2025 helps frame the debate.
What makes a Dividend Aristocrat?
The Dividend Aristocrats index is maintained by S&P Dow Jones Indices. A company must be a member of the S&P 500, have raised its cash dividend every year for at least 25 years, maintain a float‑adjusted market capitalization of at least US$3 billion and average daily trading volume of at least US$5 million.
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Constituents are equally weighted rather than weighted by market capitalization, which reduces concentration risk and ensures that each stock contributes roughly the same to index returns.
S&P rebalances the index quarterly in January, April, July and October. A company is removed if it fails to raise its dividend or is dropped from the S&P 500.
As of January 2025, the index contained 69 companies, following the addition of Erie Indemnity, Eversource Energy and FactSet Research System.
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These qualifying rules have important implications for sector composition. The index is heavily weighted toward consumer staples and industrials, which together account for more than 40 % of its weight, compared with less than 20 % in the S&P 500.
Information technology, which has dominated broad‑market returns in recent years, makes up roughly 3 % of the index.
The equal‑weight approach also means that giants such as Apple or Microsoft, both of which lack the required dividend history, are absent.
This bias toward mature, slower‑growth sectors helps explain much of the index’s performance pattern.
Long‑term performance: decades of data
From a historical perspective, Dividend Aristocrats have held their own against the S&P 500 when measured over multiple decades.
A Bloomberg analysis compiled by Berkshire Asset Management shows that from 30 June 1995 through 30 June 2025 the S&P 500 Dividend Aristocrats Index delivered a compound annual return of 11.10 % compared with 10.45 % for the S&P 500.
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Over this 30‑year span the Aristocrats index experienced roughly the same overall growth as the broader market, but with somewhat smaller drawdowns.
That risk‑management characteristic shows up in other statistics. In down markets, Dividend Aristocrats have historically provided better downside protection: the index beat the S&P 500 in two‑thirds of down months.
During periods of market stress the relative resilience is even clearer. In the 2008 financial crisis the Dividend Aristocrats index declined 22%, whereas the S&P 500 fell 38%.
The group also exhibits lower volatility, which means that even if the absolute return is similar to the market, investors experience a smoother ride.
Market lore also warns investors about the so‑called September effect, but the historical record shows that fundamentals, not calendar quirks, drive long‑term returns.
A large portion of stock‑market returns comes from dividends themselves. According to S&P Global research, dividends have made up roughly 31 % of the S&P 500’s total return over the long run.
Companies that consistently raise their payouts tend to have durable cash flows and shareholder‑friendly cultures, qualities that can help them weather economic downturns.
The equal‑weight structure further dampens volatility by reducing reliance on a handful of giant firms.
Even when new cash feels hard to deploy, dividends remain a priority for income investors.
Recent decades: technology boom vs. dividend discipline
The picture changes when examining the past decade. The Dividend Aristocrats under‑performed the S&P 500 over the last 10 years, producing a 11.0% annual return while the S&P 500 returned 15.3% per year.
The underperformance reflects the extraordinary ascent of large‑cap technology stocks, which dominate the market‑cap‑weighted S&P 500 but are lightly represented among the Aristocrats.
The index’s tilt toward “old economy” blue‑chip names such as Coca‑Cola and Johnson & Johnson means it lags in momentum‑driven bull markets.
That tilt is also evident in valuations: as of mid‑2025, the Dividend Aristocrats traded at about 45 % discount to the S&P 500 on price‑to‑book terms.
The group’s dividend yield of roughly 2 % is about twice the S&P 500’s yield, reflecting investors’ emphasis on income rather than capital gains.
Shorter‑term results reinforce the narrative. The ProShares S&P 500 Dividend Aristocrats ETF (ticker symbol NOBL) tracks the index and provides a useful snapshot of returns.
According to ProShares, at the end of August 2025 NOBL’s ten‑year annualized return was 10.45 %, slightly below the 10.87 % returned by the underlying index.
Over the same period the S&P 500’s average annual return was roughly 12–13 %, depending on whether dividends are reinvested. NOBL’s returns over shorter intervals were also solid but not spectacular: the ETF delivered a 6.37 % year‑to‑date return in 2025, compared with 6.60 % for the Dividend Aristocrats index and more than 12 % for the S&P 500, which continues to benefit from megacap growth stocks.
Over three‑ and five‑year horizons, the Aristocrats index has produced annualized returns of about 8.3 % and 9.9 % respectively, while the S&P 500 has been higher.
These figures underscore that the Aristocrats tend to lag in strong bull markets but narrow the gap over complete cycles.
Sector concentration and index construction
A closer look at the index’s makeup helps explain the divergence. The Dividend Aristocrats index is purposefully underweight technology and overweight consumer staples, industrials and materials.
That design stems from the stringent requirement of 25 consecutive years of dividend increases—many tech giants went public within the last two decades or have adopted more recent dividend policies and therefore do not qualify.
Conversely, consumer‑staples and industrials companies, with their long histories and steady cash flows, easily meet the criteria.
This sector bias can be advantageous during recessions, when staples and utilities hold up better than cyclical sectors.
During growth‑driven rallies, however, it leads to underperformance relative to a market dominated by technology and communications firms.
The equal‑weight methodology also affects performance. While a capitalization‑weighted index like the S&P 500 becomes increasingly concentrated in its largest constituents—currently the top 10 names make up roughly 39 % of the S&P 500 and 61 % of the growth‑style version, the Dividend Aristocrats index assigns each member the same weight.
As a result, it does not fully capture the outsized gains from market leaders during bull markets. On the other hand, equal weighting reduces concentration risk, lowering volatility and giving smaller companies more influence on returns.
Downside protection and the role of dividends
Why do Dividend Aristocrats tend to shine when markets fall? Companies able to raise dividends in lean years generally have durable business models, significant free cash flow and conservative balance sheets.
They often operate in mature industries with pricing power and stable demand. The historical record bears this out. According to S&P research, the Dividend Aristocrats index outperformed the S&P 500 in 66.67 % of down months and 43.88 % of up months.
In other words, it is more likely to protect capital during declines than to outpace the market during rallies.
Dividends themselves are a key component of total return. S&P Global notes that dividends account for roughly 31 % of the S&P 500’s total return, underscoring why income matters.
The Dividend Aristocrats’ higher yield, at about 2.1 % on average, provides a buffer in sideways or bearish markets and allows investors to reinvest dividends at lower prices.
Over time the compounding effect of reinvested dividends can be substantial. A stock yielding 2.5 % that grows its payout by 10 % annually offers a 6 % yield on original cost after a decade.
By contrast, many high‑growth technology stocks pay little or no dividend.
Recent additions and current valuations
The Dividend Aristocrats list is not static. Early in 2025 S&P added Erie Indemnity, Eversource Energy and FactSet Research Systems, bringing the total membership to 69 companies.
These additions illustrate how dividend discipline has expanded beyond traditional consumer and industrial names into insurance, utilities and data services.
At the same time, the index did not remove any constituents in 2024 or early 2025, signalling that even amid market volatility a growing number of companies are prioritising consistent dividend growth.
The group’s average yield remains about twice that of the S&P 500, and the index trades at a roughly 45 % discount on price‑to‑book, according to Bloomberg data compiled by Berkshire Asset Management.
Those valuations partly reflect the heavy weighting toward sectors that investors have shunned in favour of high‑growth technology stocks.
For investors seeking yield and relative value, that discount may be appealing, though it could persist if growth stocks continue to dominate.
Investing through ETFs
Buying all 69 Dividend Aristocrats individually would be cumbersome. Funds like ProShares’ NOBL or similar products from State Street and Invesco provide packaged exposure.
NOBL charges an expense ratio of 0.35 % and distributes dividends quarterly. As of late August 2025 NOBL held 69 companies, with a price‑to‑earnings ratio around 22 and average market capitalization of roughly US$100 billion.
The ETF’s ten‑year record shows annualized returns of about 10.45 %, less than the S&P 500 but higher than many bond funds.
Because the fund rebalances quarterly, it systematically sells portions of constituents that have outperformed and buys more of those that have lagged.
This “buy low, sell high” mechanic can enhance risk‑adjusted returns but can also cause the fund to sell winners prematurely during strong bull markets.
Investors should remember that dividend strategies are not risk‑free. Companies can suspend or cut dividends in extreme situations, and sector concentration can create its own risks.
Moreover, the Aristocrats rules exclude many smaller and newer firms that might become tomorrow’s champions.
The index’s performance depends partly on macroeconomic factors such as interest rates and inflation. Dividend‑paying stocks often lag when interest rates rise quickly, as their income streams compete with bond yields.
In Canada, Vanguard Investments confirmed September cash distributions, reminding ETF holders to mark record and payment dates on the calendar.
So, do they beat the S&P 500?
The data suggest that the answer is sometimes—and often with less drama. Over three decades the Dividend Aristocrats slightly outperformed the S&P 500 with a compound annual growth rate of 11.10 % vs. 10.45 %.
Over the past decade, however, they have lagged by roughly four percentage points a year as soaring technology stocks drove the broader market.
In terms of risk‑adjusted return, the Aristocrats excel: they deliver lower volatility, shallower drawdowns and better performance in down markets, beating the S&P 500 in two‑thirds of negative months.
Investors who prioritise income and stability over maximum capital gains may therefore find the strategy compelling.
On the other hand, those seeking exposure to high‑growth sectors or hoping to fully capture bull‑market rallies should recognise that the Aristocrats’ sector tilt and equal‑weight design limit upside.
Ultimately, Dividend Aristocrats are best viewed as one component of a diversified portfolio rather than a replacement for broader market exposure.
Their consistency and income can help balance more volatile holdings and support long‑term compounding, but they will not always lead the pack.
As the market’s leadership shifts and interest rates fluctuate, the relative appeal of dividend growers versus growth stocks will wax and wane.
For investors with patience and a long time horizon, owning a basket of companies that have raised dividends for at least a quarter‑century remains a time‑tested way to participate in the market—just not a guarantee of beating it.
