Monday, December 29, 2014

Dividend Angels – a possible searching ground for investment opportunities

In my strategy, I have been looking for quality companies, which have managed to increase dividends every year for at least one decade. The thinking behind this requirement is that a company which raises dividends for at least ten years in a row has shown commitment to shareholders. This also reduces the risk that a company achieves a dividend growth record simply by being lucky, and not because it has the underlying fundamentals to withstand the brutal forces of economic downcycles.  I get interested when the underlying earnings per share for those companies increase in lockstep with those growing distributions. To me this is an indication that there is a good chance that this trend could continue in the future. There are no guarantees, which is why I also focus on the fundamental analysis of each company, in order to determine if earnings and dividends can go up. I get particularly interested however, when companies with a consistent track record of dividend increases, are selling at attractive valuations.

There are approximately 350 companies which have managed to increase dividends for at least ten years in a row. US companies have historically been really good about maintaining a stable and increasing dividend payments to shareholders. This is evidenced by the consistent increase in dividends per share of companies in the S&P 500 index as well over the past 50 – 60 years. I have found that there are even more companies, which tend to increase dividends gradually over time, just not every single year.

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