Fastenal delivery trucks sit parked at loading docks in Jessup, Pa. LUKE SHARRETT/BLOOMBERG
Fastenal has been added to the S&P 500 Dividend Aristocrats Index, which comprises an elite group of companies that have raised their dividends for 25 years or more.
At the same time, Walgreens Boots Alliance, which recently slashed its dividend by 48% to 25 cents per quarter, was given the boot.
“It’s a rule and a discipline: You cut, you’re out. You hit 25 years of consecutive dividend growth, you’re in, so it shouldn’t be a surprise that Walgreens is out,” says Simeon Hyman, global investment strategist at ProShares.
ProShares runs the $11.6 billion ProShares S&P 500 Dividend Aristocrats
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exchange-traded fund, which gained 8% in 2023, including dividends.
The changes to the index were announced on Wednesday after the market closed and will take place before the market opens on Feb. 1, according to S&P Dow Jones Indices.
Fastenal recently reported better-than-expected fourth-quarter earnings. As Barron’s wrote at the time, its numbers look solid, reflecting the high level of execution at the distributor of industrial and construction supplies amid manufacturing woes.
Fastenal’s stock was recently yielding 2.3%. One thing that stood out from the company’s recent earnings presentation: It paid $1.02 billion in total dividends to shareholders in 2023, or 80% of free cash flow.
“When you invest in companies that grow their dividends for 25 straight years, you’ve got management that is committed to shareholders. That’s a big thing,” Hyman says. “Eighty percent of free cash flow paid out in dividends—that’s a cool partnership if you’re a shareholder.”
In addition, Fastenal’s trailing 12-month return on assets rose one percentage point, to 25.6%. “That’s a big increase in return on assets,” he says. “So you’re what you’re putting together is a quintessential picture of what it means to be a Dividend Aristocrat.”
ProShares S&P 500 Dividend Aristocrats ETF is an equal-weighted fund and a good proxy for these shares.
Longtime members of the S&P 500 Dividend Aristocrats Index include blue-chip names such as Chevron, Target, Walmart, and Colgate-Palmolive.
As Barron’s recently wrote, there are the Dividend Aristocrats—and then there are the Dividend Kings. This more-exclusive group has lifted annual payouts for 60 years or more.
These 15 companies include Procter & Gamble, Coca-Cola, Johnson & Johnson, and Colgate-Palmolive, as well as the lesser-known Lancaster Colony and Northwest Natural Holding.
Dividend stocks fell out of favor in 2023 as investors rotated into tech and growth stocks. Rising bond yields also hurt, offering income hunters a clear alternative.
The S&P 500 Dividend Aristocrats Index returned 8.44% in 2023, dividends included, compared with 26% for the S&P 500 index
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