Dividend Aristocrat stocks are the blue blood of stocks, they are scarce stocks, which have paid out dividends to investors for the last twenty-five years.

In the current monetary easing environment, of near-zero interest rates and bond yield suppression, which I believe is likely to prevail for the foreseeable future, Dividend Aristocrat stocks are extremely sought-after stocks.

Dividend Aristocrat Stocks
S&P 500 returns 2019

Dividend Aristocrat stocks are the blue blood of stocks, they are scarce stocks, which have paid out dividends to investors for the last twenty-five years

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Capital flows into Dividend Aristocrat stock is likely to continue

So, let’s zero on Dividend Aristocrat stocks as a way of earning passive income, which is becoming increasingly elusive for investors in the current economic and financial environment.

Many of the Dividend Aristocrat stocks are monopolists

A Monopolist is defined as the sole business responsible for the entire market output of their sector. The characteristic of a monopolist is its higher barriers to entry, either financial or supreme technological knowledge. So, the monopolist reigns over the market, and because the monopolist has no competition, it can set prices, thereby extracting abnormal profits. “In business, I look for economic castles protected by unbreachable moats” said Warren Buffett.

So, a country’s electric grid, its water and sewerage infrastructure, telecommunications network, its ports, railways, roads are all sectors where investors will find a fountain of Dividend Aristocrat stocks in free-market capitalist economies.

Warren Buffett - Economic Castles

“In business, I look for economic castles protected by unbreachable moats”

WARREN BUFFETT

Dividend Aristocrats stocks, particularly in infrastructure, are like the Guernsey cattle breed providing an endless source of nutritious milk, investors can suckle contently on the dividend teat without exposing capital to a high level of risk. 

What are the risks associated with investing in Dividend Aristocrat stocks? 

Investors need to keep a close watch on the political barometer, the political mood of the nation. 

So leftwing political ideologies, in their extreme form communism which advocate that all the factors of production should be owned by the nation and not private investors, is an extreme risk to Dividend Aristocrat stocks. The nationalization of a company means that stockholders of that company are thrown under the bus, their investment is made worthless. Private investment in Cuba was made worthless when Fidel Castro’s Communist Party came to power in 1961. 

“Good investing should be boring” – George Soros

Dividend Aristocrat stocks are less risky investments in politically stable free-market capitalist economies

In short, Dividend Aristocrat stocks make better investments where the political climate is boringly stable. 

Legendary investor George Soros once said, “Good investing should be boring”. 

But even then, investors have to contend with government regulatory bodies, which tend to be more active with left-leaning governments. Regulatory bodies are like watchdogs, making sure the consumer isn’t getting ripped off and they often force monopolists to set prices lower. 

There is a constant tugger war going on between competing stakeholders of Dividend Aristocrat stocks

Consumers want better prices, investors want more dividends, and the government is in the middle arbitrating the competing interest to keep the harmony.

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