I review the list of dividend increases every week as part of my monitoring process. Dividend increases provide very good signaling power. The important skill is to be able to evaluate each increase, in order to determine any aberrations.
Over the past week, there were 36 companies that raised dividends in the US. Twenty of them also have a track record of at least ten consecutive annual dividend increases.
I compiled the data for each one of those 20 companies to show dividend streak in years, as well as the comparison of latest dividend increase to the ten year average. In addition, readers can see the forward P/E as well as teh dividend yield, based on the new distribution.
The companies include:
Note that this table shows the dividend increases relative to the prior dividend payment. Typically, for most situations, this is a good gauge for year over yar increases. In some cases however, such as Comfort Systems, this understates dividend increases. As a matter of fact the new dividend for Comfort Systems is over 71% higher than the dividend paid during the same time last year. They've had 4 quarterly dividend increases in a row in the past 12 months or so.
This is a long-winded way of stating that this list is not going to provide all the data points for your research. It's simply a data point in the monitoring process. You need to do more reviews from it.
In my initial reviews, I typically look for:
1. Dividend Streak
2. Trends in earnings per share
3. Trends in dividends per share
4. Trends in payout ratios
5. Trends in shares outstanding
6. Valuation
7. Understanding business type
Also note that if you want to calculate the forward dividend payout ratio, you can do so pretty easily using the Forward P/E and Dividend Yield. For example, a Forward P/E of 20 is equivalent to an earnings yield of 5%. If the dividend yield is 2.50%, then the payout ratio is a function of the dividend yield over the earnings yield, or a payout ratio of 50%.
Alternatively, one can also convert the dividend yield into a price to dividend ratio. A dividend yield of 2.50% is equivalent to a price to dividend ratio of 40. If the price to earnings ratio is 20, then the forward payout ratio is a function of the price earnings ratio over the price to dividend ratio, or a payout ratio of 50%.
Relevant Articles:
- How to read my weekly dividend increase reports
- How to Retire Early With Tax-Advantaged Accounts
- How to read my stock analysis reports
