S&P 500 Dividend Aristocrats Rebalance: Fastenal In, Walgreens Out
The S&P 500® Dividend Aristocrats® seeks to track an elite group of companies that have raised their dividends for a minimum of 25 consecutive years. This index has just concluded its annual reconstitution, which was effective at the market close on Jan. 31, 2024. Fastenal has been added, while Walgreens is out, which keeps the membership list at 67 stocks.
Introducing the Index’s Newest Member: Fastenal Company
Fastenal is the latest company to be added to this prestigious index by raising its dividends for 25 consecutive years. This new S&P 500 Dividend Aristocrat is an industrial distributor that sells items ranging from fasteners to tools and has evolved into a supply chain solution company.
As of Dec. 31, 2023, Fastenal has a gross margin of 45.7%,1 a return-on-equity of 34.5% and a low debt-to-equity ratio of 7.8%. Fastenal has a dividend yield of 2.3%, which is in line with the 2.4% overall yield of the S&P 500 Dividend Aristocrats.
A Long-Term Member Is out: Walgreens Boots Alliance, Inc.
Walgreens Boots Alliance was dropped from the index after the pharmacy chain reduced its quarterly dividends by 48% to 25 cents per share. The move comes as the company seeks to strengthen its long-term balance sheet and cash position.
Walgreens had been a long-time member of the S&P 500 Dividend Aristocrats, having increased its annual dividends for almost 50 years. However, this index’s stringent methodology requires the 25 years to be consecutive, and rules are rules.
The S&P 500 Dividend Aristocrats Sector Breakdown
These changes did not have a material impact on the overall sector weights. As Exhibit 1 shows, the index retains its relatively large overweights in consistent dividend-paying sectors such as Consumer Staples and Industrials, with large underweights in IT, Communication Services and Consumer Discretionary.
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A Long History of Dividend Growth
While one of the longer-standing members of the index was removed, Exhibit 2 shows that more than half of the current constituents in the S&P 500 Dividend Aristocrats have grown their dividends for more than 40 years.
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1 Taylor Ranta Oborski, Fastenal Company Reports 2023 Annual and Fourth Quarter Earnings, Jan. 18, 2024 .
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