Saturday, 22 March 2008

Dividend Achievers with the longest history of consecutive dividend growth

One of several qualities that a dividend-growth investor is looking for in his/her investment-portfolio candidates is a history of dividend growth. If a company has a long history of uninterrupted annual dividend payments, which are increased every single year, then you can conclude with a high degree of certainty that: (1) one of the managment's top priorities is the company's shareholders and their well-being; (2) the company will be very reluctant to cut or eliminate its dividends in good or bad times; and (3) the company is likely to continue the practice of increasing its dividends in the future. Picking a stock of one of such companies at the right price gives you pretty good chances of ending up with a cash-generating equity in your long-term investment portfolio by the time you decide to retire.

Mergent's Dividend Achievers ("MDA") list includes publicly listed companies which have increased their annual dividend payments for ten or more consecutive years. Currently there are 312 companies on this list, but this number varies over time, for example, hitting the all-time high of 437 companies in 1987. It is one of the most popular reference lists analyzed by those investors who are looking for high-quality dividend-growth stocks. Since a long history of consecutuve annual dividend increases is one of the key parameters in picking the right dividend stock, researching the MDA companies with the longest history of dividend growth may not be such a bad idea when selecting potential buy targets for your portfolio.

I used the latest Winter 2008 issue of Mergent's Dividend Achievers publication to look at the top 20 companies on the list of oldest dividend growers. Here is a snapshot list of these companies:

The spreadsheet link of this table can be found here.

The list actually includes 21 companies, each with a whopping history of unterrupted annual dividend growth of more 41 years or more. These are the companies that managed to go through several complete market cycles without dividend freezes or cuts. Note that most of them are established manufacturing companies whose brands are well recognized globally by their customers and consumers. They are not necessarily the highest-yielding stocks or top performers in terms of recent total return rates, as the corresponding columns of the spreadsheet suggest. However, most of them are firms with solid long-term fundamentals and excellent long-term prospects.

Some of them are also very good defensive stocks, as indicated by relative positions of their most recent prices within a 52-week low-high spread. Their fairly high current P/E ratios also confirm these stocks' defensive value for investors. It is interesting to note how the simple-average total-return ranking of this group within the total Dividend Achievers list increases in value from the 5-year to 1-year horizon, which reflects the fact that many shorter-term dividend growers started taking price and dividend-growth hits as the markets began their correction. The "old school" dividend-growth stocks are probably more resilient to adverse market shocks.

In any case, there are several very good candidates on this short list, and I hope that some of you will do your homework and will find a stock or two that you may consider adding to your portfolio after performing some additional analysis of company fundamentals and wating for the more appropriate entry point to buy a stock at better prices.

I am thinking about adding several extra posts based on Mergent's Dividend Achiever list. Stay tuned.

It is gratefully acknowledged that this post was published in the Carnival of Personal Finance # 145 hosted by FrugalTrader at Million Dollar Journey.


Dividends4Life said...

Great read! Another list you may want to consider is the S&P 500 Dividend Aristocrats. This list is designed to measure the performance of S&P 500 index constituents that have followed a policy of consistently increasing dividends every year for at least 25 consecutive years.

I plan to include your article in my weekly carnival/article review Friday.

Best Wishes,

BEIT said...

Thanks. I agree with your opinion on the the S&P list and think that it is another top list for dividend investors.

Time permitting in the nearest future, I am planning on preparing a few more posts based on Mergent's Dividend Achievers most recent publication. Any ideas and suggestions on what information to discuss will be welcome.

dividend growth said...

Thanks for sharing this informatio with us BEIT.