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The UK High Yield Dividend Aristocrats 2022 are UK stocks that have increased or maintained their dividend for at least ten consecutive years. However, that fact alone does not qualify a stock as an UK High Yield Dividend Aristocrat. 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 its dividend stable for at least ten 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 every month. If a stock announces 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.

These criteria are very different from those used to determine the list of Dividend Aristocrats in the US, which must be in the S&P 500 Index and need 25+ years of increasing dividends. There are currently about 66 stocks in the US Dividend Aristocrats. This number is not capped. On the other hand, there are only 39 stocks in the UK High Yield Dividend Aristocrats 2022 list as of December 31, 2021. But this is by design.

These criteria 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 2022 are similar, though, in that the indices are both weighted by yield. 

These companies have survived periods of inflation, stock market crashes, global crises, and deep recessions but still met the criteria described above. Often these are the most prominent 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 growth stocks.

Performance Update of The UK High Yield Dividend Aristocrats 2022

The UK High Yield Dividend Aristocrats 2022 currently (as of December 31, 2022) has a dividend yield of about 4.94%. The average forward price-to-earnings (P/E) ratio is approximately 13.57X, while the trailing P/E ratio is about 15.89X.

The mean market capitalization is roughly $22,786 million, and the median market capitalization is approximately $8,625 million. The market cap ranges between about $1,015 million to $133,487 million. The total market capitalization of the UK High Yield Dividend Aristocrats is approximately $888,635 million.

In 2022, the UK High Yield Dividend Aristocrats provided a total return of 15.05%. This return was the highest return since 2019 and the third positive return in the past 5-year. The price return was 9.97%. However, this performance was relatively poor, considering the solid positive market returns of most US exchanges and indices.

Historical Performance

The chart below shows the historical performance over the trailing 10-years. In the past 10-years, the total annualized return was 5.87%, and over the past 5-years, it was 2.27%. The standard deviation over the past 10-years was 13.1% and over the past 5-years was 15.61%.

Source: S&P 500 Dow Jones Indices

The table below shows the calendar year performance from 2012 to 2021.

Source: S&P 500 Dow Jones Indices

Stocks from the Financials sector have the most significant representation on the list of UK High Yield Dividend Aristocrats at about 30.3%. The sector with the following highest representation is Industrials at approximately 17.1%. The sector with the third-highest representation is the Consumer Staples Sector at roughly 15.8%. The top three sectors make up that great majority of the UK High Yield Dividend Aristocrats at 63.2%.

Source: S&P 500 Dow Jones Indices

Stocks in the Financial sector tend to have somewhat more volatile earnings and cash flows that depend on the stock market valuation and interest rates. However, the scale of large financial institutions let them pay a growing dividend over time.

Consumer staples tend to have stable earnings and cash flows. This tends to limit dividend cuts and suspensions during recessions and economic downturns. Furthermore, consumer staples stocks 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 but not the same as the US Dividend Aristocrats list, which has Consumer Staples, Industrials, and Materials as the top three sectors.  

The sector breakdown is unlike the Canadian Dividend Aristocrats list, with 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 displayed lower annualized returns of 5.19% (after subtracting expenses) than the underlying index of 5.37% since inception. This difference is likely due to annualized tracking error, which is the difference between the fund’s price and the index’s price. However, this difference 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 7+ consecutive years of dividend growth as a criterion for inclusion instead of 10+ years of dividend growth.

List of Top 10 UK High Yield Dividend Aristocrats 2022

The stocks with the top 10 weighting in the UK High Yield Dividend Aristocrats are listed below. Note that the weightings are based on dividend yield. The top 10 stocks in the list constitute about 46.3% of the UK High Yield Dividend Aristocrats.

Source: S&P UK High Yield Dividend Aristocrats Index and SPDR S&P 500 UK Dividend Aristocrats UCITS ETF (Data as of January 31, 2022)