Dividend aristocrats: a good beginner investment strategy?

Investing means taking financial risks, to an extent. However, some types of investment do offer just a bit more stability and peace of mind. Investing in dividend aristocrats is one of these options. Why can this also be an interesting approach for inexperienced investors? We’ve set out the most important reasons for you.

What are dividend aristocrats?

Investing in stocks can feel overwhelming, especially if you have yet to take your first steps in the stock market or do not have that much experience. Prices fluctuate and companies do not always perform as expected. And how can you know which shares will prove profitable in the long term?

Dividend aristocrats are listed companies for which such uncertainties mostly don’t apply. These players:

• Have paid dividends to their shareholders for at least 25 consecutive years, and have also increased them year after year.
• Are among the largest and most stable companies in the world.
• Are often active in sectors less sensitive to economic fluctuations, such as consumer goods, pharmaceuticals or utilities.

Why is that so special?

A dividend is an amount distributed to shareholders by a company when it makes a profit. To give you an idea, Belgian listed companies are expected to pay no less than EUR 6.4 billion in dividends in 2025 (source: L’Echo/Trends). Still, payment of dividends is never guaranteed. For some companies, such dividends may take a steep dive in a certain year or even be non-existent.

Dividend aristocrats are companies that have been paying and actually increasing their dividends for years and years, even decades. Including in times of economic crisis. Companies that maintain such a performance for more than 50 years are known as ‘dividend kings’.

In the end, the message is the same: these are companies whose demonstrable financial health makes them attractive to investors who desire stability and a regular income from dividends.

From Coca-Cola to McDonald’s

Decades of guaranteed and ever-larger dividends. A quick selection from quite an impressive list of companies that have managed this feat: Coca-Cola: 62 years in a row. Caterpillar: 31 years in a row. Walmart: 51 years in a row. McDonald’s: 47 years in a row. Johnson & Johnson: 62 years in a row.

Fun fact: to be considered a dividend aristocrat in Europe, your dividends ‘only’ need to have increased for 10 consecutive years. There are two Belgian companies to be found among Europe’s 350 dividend aristocrats: UCB, active in biopharmaceuticals, and industrial holding company GBL.

A comparison between the S&P Dividend Aristocrats stock market performance and one of the world’s most well-known stock market indices, the S&P 500, over the past 34 years (source: plus-riche.com).

Why is this an interesting option for beginner investors?

We have already provided a few hints above. Investing in dividend aristocrats offers multiple potential benefits:

Less volatility, more stability

Dividend aristocrats are generally established companies with a strong market position. In principle, that means their share prices will be less volatile than those of the market or index of which they form a part.As a beginner investor, this makes price fluctuations less stressful. Do take into account that whenever dividends are paid – in stock market terms, this is the ex-dividend date – the price will fall by the amount of dividend paid.

Building passive income through dividend payments

On top of your returns and the associated compound interest, dividends also allow you to build additional passive income as an investor. You can choose to reinvest this money or simply enjoy the additional source of income.

Perfect fit for long-term strategy

Dividend aristocrats are a good fit for a long-term strategy, where you keep a company’s shares in your portfolio for years and take full advantage of their guaranteed dividend and growth in value.

How do you invest in dividend aristocrats?

Interested in learning more about the wonderful world of these dividend champions? You can invest in them in various ways.

ETFs or trackers

The popularity of ETFs, or trackers, is on the rise. While dividend aristocrat ETFs do not guarantee dividend payments, they can be an interesting option to reduce your investment risk and still achieve handsome returns. Why not invest in a basketful of aristocratic dividend shares?

Investing automatically or through someone else

You can set up an investment plan whereby you invest set amounts in one or more investment funds automatically at regular intervals. This limits the impact of market fluctuations.

Asset management

Prefer to leave your investment decisions entirely up to the finance professionals? In that case, asset management may be an interesting option. All that’s required of you is to express your financial goals and pick the most fitting strategy. Everything else is done for you. Please note that your own contribution is often higher with this type of investing.

Buying individual shares

Once you have been making investments for a while and know all the tricks, you may decide to actively seek out companies that have been paying dividends reliably for years. Pay attention to a company’s dividend yields – the amount of dividend you receive in relation to the share price – and check whether they are pursuing stable earnings growth and a sustainable dividend policy.

Have you considered the following aspects as well?

Besides the obvious benefits of investing in dividend shares, be sure to keep these points in mind:

• Is the company’s financial health sufficient to maintain dividend payments at this level without going into debt?
• Does the company pay dividends in cash, in own shares or by some other method?
• Are you fully aware of the various tax implications?

The more you learn about the world of dividends, the better prepared you will be to handle any surprises. Moreover, you will learn to recognise the signs of possible downward trends before they occur. Whatever you do, maintain vigilance when investing and stay conscious of the capital risks involved. Only invest money you won’t need right away, diversify your stocks sufficiently, etc. In short, always maintain a healthy amount of caution.

Keytrade Bank: your online gateway to the dividend aristocrats

Dividend aristocrats can be a great option for beginner investors looking for stability, an attractive source of passive income and long-term growth.

Are you ready to discover the world of dividend investing? Keytrade Bank makes it easy to get started, whether your investments are large or small.

Did you know that with us, you’ll pay just €2.45* on small orders up to €250 placed on the Brussels, Paris or Amsterdam stock exchange? Furthermore, we have also been offering extra-favourable rates for investments on US stock exchanges since January 2025. Become a customer for free and we’ll do the rest!

(* Fees include VAT and exclude stock exchange taxes.)