I review the list of dividend increases every week as part of my monitoring process.
This exercise helps monitor the development in companies I already own. It also helps me monitor the breadth in the dividend growth investing universe.
I typically focus my attention on the more established dividend growth companies in those weekly review.
I define "established" as a company that has managed to increase dividends for at least ten years in a row. I have found that this requirement weeds out a lot of cyclical and accidental records of annual dividend increases. It's also early enough in the grand scheme of things for the types of companies that will one day reach dividend king status...
Over the past week, there were sixteen companies with a minimum ten year track record of annual dividend increases, which also increased dividends to shareholders.
The companies include:
Of course, this list is merely a list of companies that increased dividends last week.
It is not a recommendation or a "buy list" by any means necessary.
It does provide some perspective in how I think about Dividend Growth Investing.
For example, I would compare the recent dividend increase for a company to the five - and ten - year average. That most recent dividend increase provides helpful insight into management's evaluation of the business and economic environment in the near term.
A slowdown in dividend growth versus the average is somewhat of a warning signal, that would warrant further review if I owned the business. If I didn't, it would likely place it in the do not review pile as of yet.
An increase in dividend growth versus the average could pique my interest, and warrent further review to determine if there is fundamental shift upwards to warrant that increase. One also has to be a little skeptical, as many times a large one-time increase in dividends could signal management that is too overconfident or trying to look that way.
In general, Iwant a slow and steady growth within a range that's probably the most sustainable. Dividend growth should closely track the growth in fundamentals (read - earnings per share OR FCF/share if you want to be fancy). Any divergence where dividend growth is happening despite deterioration of the business should be studied.
All of those instances above require monitoring recent dividend increases to the historical averages, along with trends in earnings per share, payout ratios, major events (e.g. acquisitions).
Last but not least, you also want to review company valuations. Valuations are the combination of current P/E ratios, dividend yields along with historical dividend growth and growth expectations.
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