Standard & Poor’s has launched a new index designed to measure the performance of S&P 500 companies that have consistently increased dividends each year for at least 25 years.

The rating agency says that companies on the new S&P 500 Dividend Aristocrats Index have shown to maintain more sustainable payout ratios, better return on equity, higher quality ranks, and stronger credit ratings than typical yield driven portfolios over the past 30 years. In addition, the S&P 500 Dividend Aristocrats Index has outperformed comparable benchmarks such as the S&P 500, S&P 500 Equal Weight Index and S&P 500 Barra Value index over the last 3, 5, 10 and 15 years, and has done so with lower risk.

“Stable and increasing dividends are traditionally used by corporate managers to signal their confidence in their company’s prospects,” says David Blitzer, managing director and chairman of the Index Committee at Standard & Poor’s. “Additionally, investors consider long dividend track records a sign of corporate maturity, growth and strength.”

It also launched a European version, the S&P Europe 350 Dividend Aristocrats Index, which draws upon the constituents of the S&P Europe 350 that have increased dividends every year for at least 10 years.

Standard & Poor’s research has also determined the importance of both capital appreciation and dividend income to total returns, with the former having contributed two-thirds, and the latter one-third, to the total return of the S&P 500 since 1926.

The Dividend Aristocrats index series has a total return orientation and is diversified across sectors, unlike dividend yield oriented portfolios, which typically have a 60%-70% weight in rate sensitive sectors such as Utilities and Financials. Dividend Aristocrats indices are equally weighted, with constituents re-balanced every quarter. Membership for the series will be reviewed annually in December. Constituents have to meet minimum size and liquidity limits as per criteria of their parent indices.

The initial list of names includes companies such as: Abbott Labs, ADP, Bank of America Corp., General Electric, Johnson & Johnson, Coca Cola Co., Eli Lilly, McDonald’s Corp., McGraw-Hill, 3M Company, Merck & Co., Pfizer, Procter & Gamble, State Street Corp., U.S. Bancorp, Walgreen Co. and Wal-Mart Stores.