The UK High Yield Dividend Aristocrats 2021 are U.K. stocks that have increased or maintained their dividend for at least 10 consecutive years. But that alone does not qualify a stock as UK High Yield Dividend Aristocrat. In order to be included on the list a company must meet the following criteria:
- The company must be a member of the S&P Europe BMI domiciled in a eurozone country. The stock must also trade in Euros on a stock exchange in the eurozone.
- The stock must have increased or maintained stable its dividend for at least 10 consecutive years. The yield cannot be greater than 10%. New index constituents must have a maximum of 100% dividend payout ratio. Existing index constituents must have a non-negative dividend payout ratio.
- The stock must have a market capitalization of at least $1 billion.
- The average daily value traded (ADVT) must be at least $5 million.
- During the quarterly rebalancing the weighting of a single stock is capped at the lower of 5% or five times the stock’s liquidity weight
- Each GICS sector weighting is capped at 30%.
- Index weightings are based on yield.
- The weighting of each country is capped at 30%.
- Index constituents are reviewed for dividend suspensions (omissions) and cuts on a monthly basis. If a stock announced a dividend suspension or cut, it is removed from the index and replaced by the highest-ranked stock that is not already in the index.
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These criteria are very different than those that are used to determine the list of Dividend Aristocrats in the U.S., which must be in the S&P 500 and need 25+ years of increasing dividends. They are also very different than the criteria used to determine the list of Canadian Dividend Aristocrats, which has smaller market capitalization and consecutive annual dividend increase requirements. The UK High Dividend Aristocrats 2021 are similar though in that the indices are weighted by yield. There are currently about 65 stocks in the U.S. Dividend Aristocrats. This number is not capped. On the other hand, there are only 40 stocks in the UK High Yield Dividend Aristocrats 2020 list as of September 30, 2021. But this is by design.
These companies have survived periods of inflation, stock market crashes, global crises, and deep recessions but still met the aforesaid criteria. Often these are the largest and typically well-known stocks in the UK with high yields. Hence, this list serves as a starting point for small investors seeking to research potential ideas for UK dividend stocks.
Performance Update of The UK High Yield Dividend Aristocrats 2021
The UK High Yield Dividend Aristocrats 2021 currently (as of September 30, 2021) has a yield of about 4.88% and the average forward price-to-earnings ratio is approximately 13.21X. The mean market capitalization is roughly $21,940 million and the median market capitalization is roughly $8,079 million. The market cap ranges between approximately $1,144 million to $138,770 million. The total market capitalization is approximately $877,618 million.
In 2020, the UK High Yield Dividend Aristocrats provided a total return of -16.35%. This was the lowest return since 2018 and the third negative return in the past decade. The price return was -19.12%. This performance was relatively poor considering the strong positive market returns of most U.S indices. This was at least in part caused by dividend cuts and suspensions for many UK stocks. In the UK more than half the companies cut or suspended their dividend.
The chart below shows the historical performance over the trailing 10-years. In the pat 10-years the total annualized return was 5.32% and over the past 5-years it was 2.66%. The standard deviation over the past 10-years was 13.11% and over the pat 5-years was 15.61%.
The table below the calendar year performance from 2011 to 2020.
Other Dividend Growth Stock Lists
For U.S. stocks, I have previously provided the following lists:
- List of Dividend Kings in 2021
- List of Dividend Aristocrats in 2021
- List of Dividend Champions in 2021
- List of Dividend Contenders in 2021
- List of Dividend Challengers in 2021
- Dogs of the Dow in 2021
For Canadian stocks, I have previously provided the following list:
Other dividend stock lists
Details on the UK High Yield Dividend Aristocrats 2021
The list of UK High Yield Dividend Aristocrats 2021 has a target of 40 stocks. In practice, the actual number is typically between 30 and 40 stocks. There are 40 stocks in the list as of this writing. Note that there is a proposal to change the selection process to adjust the number of years of consecutively increasing dividend and market cap if there are less than 40 eligible stocks. There is also a proposal to adjust the monthly dividend review process. This will take effect prior to the market open on Monday, July 1, 2021. This will effect the monthly dividend review on Friday, July 23, 2021.
UK Dividend Aristocrats Sector Breakdown
The sector breakdown for UK High Yield Dividend Aristocrats 2021 is seen in the chart below as of September 30, 2021. Stocks from the Financials sector have the greatest representation on the list of UK High Yield Dividend Aristocrats at about 30%. The sector with the next highest representation is Consumer Staples at approximately 19.4%. The sector with the third highest representation is the Industrial Sector at roughly 15.9%. Combined the top three sectors make up that great majority of the UK High Yield Dividend Aristocrats at about 65.3%.
Stocks in the Financial sector tend to have somewhat more volatile earnings and cash flows that depend on the stock market valuation as well as interest rates. Consumer staples tend to have stable earnings and cash flows. This tends to limit dividend cuts and suspensions during recession and economic downturns. Further, consumer staples stocks in general slowly grow revenue and earnings over time. In turn, this allows annual regular dividend increases. The Industrial sector is also cyclical but many of these stocks tend to grow revenue and earnings over time allowing them to maintain a stable dividend at the very least.
This sector breakdown is similar to the U.S. Dividend Aristocrats list, which has Industrials, Consumer Staples, and Financials as the top three sectors. The sector breakdown is unlike the Canadian Dividend Aristocrats list, which has Financials, Energy, and Industrials as the top three sectors.
Fund Performance Differences
As a group, some funds have exhibited lower annualized total returns than the UK High Yield Dividend Aristocrats index. For example, one fund has exhibited lower annualized returns of 5.33% (after subtracting expenses) than the underlying index of 5.53% since inception. This is likely due to annualized tracking error, which is the difference between the price of the fund and the price of the index. This can also occur due to changes in the underlying index resulting in higher transaction costs for funds.
Note that there is some confusion between the actual index and some exchange traded funds or ‘ETFs’ that use the index as the basis of stock selection. For example, at least one fund uses a 7+ consecutive years of dividend growth as a criterion for inclusion instead of 10+ years of dividend growth.
List of of Top 10 UK High Yield Dividend Aristocrats 2021
The stocks with the top 10 weighting in the UK High Yield Dividend Aristocrats are listed below. Note that the weightings are based on yield. The top 10 stocks in the list constitute about 46.3% of the UK High Yield Dividend Aristocrats.
|Phoenix Group Holdings||5.32|
|WM Morrison Supermarkets||5.21|
|Legal & General Group||5.07|
|British American Tobacco PLC||5.05|
|Rio Tinto PLC||4.85|
|Jupiter Fund Management||4.68|
|IG Group Holdings PLC||4.46|
|Admiral Group PLC||3.99|
|BAE Systems PLC||3.73|
Prior Year Lists and Articles
Here are my recommendations:
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Prakash Kolli is the founder of the Dividend Power site. He is a self-taught investor, analyst, and writer on dividend growth stocks and financial independence. His writings can be found on Seeking Alpha, InvestorPlace, Business Insider, Nasdaq, TalkMarkets, ValueWalk, The Money Show, Forbes, Yahoo Finance, and leading financial sites. In addition, he is part of the Portfolio Insight and Sure Dividend teams. He was recently in the top 1.0% and 100 (73 out of over 13,450) financial bloggers, as tracked by TipRanks (an independent analyst tracking site) for his articles on Seeking Alpha.