As part of my monitoring process, I review the list of dividend increases every week. This is helpful as a method to observe recent developments in companies I own. This process is helpful in identifying companies for further research, which may be exhibiting certain characteristics that look promising.
I usually focus on companies with at least a ten year streak of annual dividend increases, in order to focus my attention to companies that can establish and maintain a streak throughout a full economic cycle.
The next steps involve evaluating the rate of increase relative to the historical average, in an effort to determine consistency. Usually, I end up observing a dividend growth rate that is accelerating or decelerating.
I also try to review trends in earnings, and looks at valuation, in order to determine if a company is worth pursuing further.
There were several companies raising dividends last week. The companies include:
If I were to evaluate the companies on this list, I would leverage my screening criteria, which I first outlined in 2010.
Notably I would look for the following:
1) Ten years of annual dividend increases
2) Earnings per share that are increasing over the past decade
3) Dividend Payout Ratio below 60% ( however I am willing to make exceptions for REITs, MLPs, Utilities and Tobacco companies)
4) Dividend growth rate that exceeds the rate of inflation ( however this also needs to take into account the rate of earnings and dividend growth)
5) A P/E ratio below 20
Since I have some experience evaluating dividend companies, I also modify my criteria based on the environment we are in and the availability of quality companies. If I see a company with a strong business model and certain characteristics that I like, I may require a dividend streak that is lower than a decade. I have also found success in looking beyond screening criteria by purchasing stocks a little above the borders contained in a screen.
It is important to be flexible, without being too lenient.
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