Both the S&P 500 Dividend Aristocrats and the S&P 500/MarketAxess Investment Grade Corporate Bond Index were designed to measure the performance of blue-chip, high-quality companies of the S&P 500. They both focus on well-capitalized U.S. companies with strong credit fundamentals and proven capital management. Taken together, they offer an opportunity for steady income, protection against market volatility, and enhanced liquidity.
- The S&P 500 Dividend Aristocrats is designed to measure the performance of S&P 500 constituents that have increased dividends every year for at least 25 years.
- The S&P 500/MarketAxess Investment Grade Corporate Bond Index tracks the largest-issued, high-quality bonds of S&P 500 constituents. The index offers efficient exposure to the broader U.S. investment-grade corporate bond market, while also including bonds that tend to trade in larger volume and with higher frequency, thus offering greater depth of liquidity.
- Combining the complementary attributes of the S&P 500/MarketAxess Investment Grade Bond Index and the S&P 500 Dividend Aristocrats can potentially result in increased yield, reduced volatility, and higher risk-adjusted returns.
Constituents of the S&P 500 Dividend Aristocrats or the S&P 500/MarketAxess Investment Grade Corporate Bond Index are limited to just 200 of the S&P 500 companies, but there are only 26 companies that reside in both. These include the household names such as AT&T, CocaCola, Exxon Mobil, Johnson & Johnson, McDonald’s, Procter & Gamble, and Walmart.
Membership in the S&P 500 Dividend Aristocrats requires a proven record of balance sheet strength and disciplined capital management. However, the strict eligibility rules exclude some of the highest-quality companies in the world. Many of the largest U.S. blue-chip companies do not have the dividend history to be eligible for inclusion; others may have halted dividends during the financial crisis but have shored up balance sheets and are now fundamentally solid. Members of the S&P 500/MarketAxess Investment Grade Corporate Bond Index that are not in the S&P 500 Dividend Aristocrats include highly rated companies such as Microsoft, Apple, Cisco Systems, and Berkshire Hathaway (see Exhibit 2).