Some investors might be wondering what exactly is a 'Dividend Aristocrat'?
Basically, a Dividend Aristocrat is a constituent of the S&P 500 that has increased its dividend every year, for the last 25 consecutive years.
That is a pretty extraordinary effort, especially when you take into account the numerous economic shocks that have taken place during that period – including the GFC.
Although the list of 'Dividend Aristocrats' is limited to US shares, I though it would be an interesting exercise to see if any ASX shares could be worthy of being in the same league.
Limiting my search to the S&P/ASX 200 (Index: ^AXJO) (ASX:XJO), here are four shares that I think could one day be recognised as Australia's Dividend Aristocrats:
Webjet Limited (ASX: WEB)
It might be surprising for some investors to find that Webjet has actually been one of the most consistent dividend payers on the ASX.
Since paying its first dividend of 2 cents in 2007, the company is yet to cut its dividend payout and has instead managed to increase its dividend by 625% to 14.5 cents per share.
The outlook for Webjet is promising and I wouldn't be surprised to see higher dividends being dished out over the next five years.
Sonic Healthcare Limited (ASX: SHL)
Sonic has had an unbroken run of paying higher dividends since 1994. Like Webjet, its first dividend was 2 cents per share and it now pays a dividend of 74 cents per share – an increase of 3,600%!
The company should enjoy fairly brisk tailwinds for many years to come, and barring any poor strategic decisions from management, there is little reason to question Sonic's ability to deliver further dividend increases over time.
Ramsay Health Care Limited (ASX: RHC)
Few investors would probably consider the private hospital operator as a generous dividend-paying share, but the company has a remarkable record of increasing its dividends year-after-year.
As the chart below highlights, Ramsay has grown its dividend by 16.7% annually since 1998. Remarkably, its first dividend was 3 cents per share – compared to $1.19 in FY16.
Like Sonic, the outlook for Ramsay is promising and its overseas expansion plans could certainly give the company an additional earnings boost over the next decade.
Challenger Ltd (ASX: CGF)
Challenger was one of the few financial shares that was able to maintain its dividend during the GFC, and as the graph below highlights, it has grown its dividend quite strongly in recent years.
The annuity provider first paid a dividend of 5 cents per share in 2005 and this has since grown to a payout of 32.5 cents per share – an increase of 550%.
With annuities becoming increasingly popular amongst retirees and financial planners, I think Challenger is well placed to capitalise on the huge opportunity that lies ahead.
Foolish takeaway
The four shares above highlight the importance of investing in companies that have the ability to consistently increase their dividends over many years. Don't just invest in shares with the highest yield, but consider which companies will be able to grow their dividends over time.
