Great investments take time

Q: What are Dividend Aristocrats?

A: A Dividend Aristocrat is a stock that is a member of the S&P

500 index and has increased its dividend every year for a minimum of 25 consecutive years.

For example, of the 51 current Dividend Aristocrats, McDonald’s has increased its dividend for 40 consecutive years, and Johnson & Johnson has increased its payout

54 years in a row.

But just because a stock’s dividend has increased consistently for decades doesn’t guarantee it will continue to do so. However, a strong record of dividend increases indicates a company has grown its profits nicely over time, which is indicative of a durable competitive advantage.

Over time, the Dividend Aristocrats have a history of outperforming the overall S&P 500, but just like any other group of stocks, not all are excellent investments merely because they’re in a high-performing index.

Some investors may choose to research and invest in individual Dividend Aristocrats. For others, a fund that tracks the index — such as the ProShares S&P 500 Dividend Aristocrats — can be a smart way to get broad exposure to all stocks that qualify as Dividend Aristocrats without relying on the performance of any single stock. None of the index components account for more than 2.5% of the fund’s holdings.

The Motley Fool owns shares of and recommends Johnson & Johnson.