European dividend aristocrats

We have written about American dividend aristocrats in the past, but this time we are zooming in on European dividend aristocrats. While many companies had to cut dividends as a way to conserve capital amid the Covid-19 pandemic, the companies within the S&P Europe 350 Dividend Aristocrats index raised dividends and have done so for at least 10 consecutive years.

Keep reading to find out more about the European Dividend Aristocrats and the benefits of investing in dividend stocks in general.

S&P Europe 350 Dividend Aristocrats

The S&P Europe 350 Dividend Aristocrats is an index of large-cap, blue-chip European companies that have persistently raised their dividends over the years. For a company to be included in the index, S&P Dow Jones Indices (a company that produces and maintains stock market indices) has laid out certain criteria. The requirements are:

• Be a constituent of the S&P Europe 350 index
• Have increased dividends every year for at least ten years in a row
• Have a float-adjusted market capitalisation (meaning only available shares, the ‘free float’, are included) of at least $3 billion
• Have an average daily trading volume of no less than $5 million for six months before the rebalancing reference date

Index makeup

The S&P Europe 350 Dividend Aristocrats index consists of 41 stocks within the S&P Europe 350 index. The industrials sector represents the largest weight in the index at 29.2%, and in terms of countries, the United Kingdom carries the most weight at 34.1%. The top-10 holdings within the index as of May 2021 include:

Dividend aristocrats outperform

Past performance does not indicate future returns; however, the S&P Europe 350 Dividend Aristocrats index has historically outperformed the broader index, S&P Europe 350.

Benefits of investing in dividend stocks

Although dividends alone are not a good indicator of a company’s (future) performance, dividend-paying stocks, included in a dividend aristocrats list or not, can be beneficial for investors. Some of the main pros of investing in dividend stocks are:

• Passive income—Although dividends are never guaranteed, investors can receive regular passive income from just holding a stock.
• Volatility—Studies have shown that during bear market periods, dividend-paying stocks have outperformed stocks that do not offer dividends.
• Compounding—Reinvesting dividends to buy more shares and then using dividends from the new shares to buy even more shares, allows dividends to compound.

Investing through DEGIRO

Is investing in dividend stocks a part of your investment strategy? Whether you want to invest in one of the S&P Europe 350 Dividend Aristocrats or just stocks in general, we offer incredibly low fees.

If a product you hold pays a dividend and DEGIRO is notified about it accordingly, it is shown in your portfolio under the ‘Upcoming dividends’ section. After it is paid, the listing will be removed from that section and paid into your Cash Account. A record of this can be found on your account statement under the ‘Activity’ tab. Once a dividend is paid, it can be withdrawn, reinvested or left in the Cash Account. Please be aware that we do not offer automatic dividend reinvestment.

Dividend aristocrats have a history of paying and increasing dividend payments, but dividend payments are not guaranteed. Companies can choose to suspend, reduce or eliminate dividend payments.

The information in this article is not written for advisory purposes, nor does it intend to recommend any investments. Please be aware that facts may have changed since the article was originally written. Investing involves risks. You can lose (a part of) your deposit. We advise you to only invest in financial products that match your knowledge and experience.

Sources: S&P Dow Jones Indices, Corporate Finance Institute, Blackrock, Kiplinger, Seeking Alpha, Benzinga, Forbes