Twelve Dividend Aristocrats Need Just 1.5% Price Growth to Beat the 10-Year

The 10-year Treasury yields 4.9% — more than double the 2.4% yield of the S&P 500's Dividend Aristocrats — yet Mark Hulbert argues the stocks are still the better bet over the next decade. His reasoning is arithmetic, not sentiment: Treasury yields are fixed, while Aristocrats' dividends grow.

Dividend Aristocrats are S&P 500 companies that have raised their dividends every year for at least 25 consecutive years. That 2.5-percentage-point yield gap looks decisive at first glance. Hulbert's calculation closes it: if the Aristocrats' dividends keep growing at their average pace since 2000, their share prices need to rise only 1.5% annualized for a portfolio of them to beat the 10-year Treasury over ten years. Rarely, he notes, has the group's 10-year price-only growth rate fallen below that threshold.

What did Warren Buffett call the 'secret sauce'?

The compounding logic behind dividend growth is old, but sufficiently overlooked that Warren Buffett once called it the "secret sauce" behind Berkshire Hathaway's success. In his 2022 annual report, Buffett laid out his Coca-Cola position as proof:

"In August 1994… Berkshire completed its seven-year purchase of the 400 million shares of Coca-Cola we now own. The total cost was $1.3 billion… [and] the cash dividend we received from Coke in 1994 was $75 million. By 2022, the dividend had increased to $704 million. Growth occurred every year, just as certain as birthdays. All Charlie [Munger] and I were required to do was cash Coke's quarterly dividend checks. We expect that those checks are highly likely to grow."

Buffett added: "These dividend gains, though pleasing, are far from spectacular. But they bring with them important gains in stock prices. At year-end [2022], our Coke investment was valued at $25 billion."

That works out to roughly a nineteen-fold gain on a $1.3 billion outlay, driven largely by a dividend that grew nearly tenfold. The takeaway in plain words: the strategy's power lies in decades of compounding, not years.

What is the catch?

The catch is time. Buffett's approach targets horizons longer than a decade, and Hulbert concedes there is no assurance the average Dividend Aristocrat will beat the S&P 500 over shorter periods. It hasn't over the past decade: an ETF benchmarked to the Dividend Aristocrats has trailed an S&P 500-linked ETF, per his chart comparison. A 4.9% guaranteed Treasury yield still wins if dividends stall or prices fall.

Which funds and stocks make the list?

For diversified exposure, Hulbert points to two ETFs:

• ProShares S&P 500 Dividend Aristocrats ETF — the fund most closely benchmarked to the full Aristocrats list, with a 0.35% expense ratio.
• Vanguard Dividend Appreciation ETF — requires only 10 consecutive years of dividend increases, with a 0.04% expense ratio, roughly one-ninth the cost.

For stock pickers, Hulbert's table names twelve Dividend Aristocrats recommended for purchase by at least two of the investment newsletters tracked by his performance-auditing firm, Hulbert Ratings:

• Abbott Laboratories — 2.3% yield, 3 newsletters
• Air Products and Chemicals — 2.3%, 3
• Archer-Daniels-Midland — 2.9%, 3
• Eversource Energy — 4.6%, 2
• Hormel Foods — 5.5%, 2
• Kimberly-Clark — 4.9%, 2
• Lowe's Cos. — 2.3%, 2
• Medtronic — 2.9%, 2
• PPG Industries — 2.4%, 2
• Realty Income — 5.6%, 2
• Roper Technologies — 0.8%, 2
• Target — 3.0%, 2

The yields span a wide band — from Realty Income's 5.6% down to Roper's 0.8% — a reminder that newsletter editors are betting on dividend growth, not current income alone.

Investors should also weigh the source: Hulbert Ratings audits newsletters that pay a flat fee to be audited, so the recommendations reflect a paid, monitored universe rather than the whole market. If dividends keep compounding as they have since 2000, the 1.5% hurdle is low; if they don't, the fixed 4.9% Treasury remains the safer decade-long hold.