Sunday, March 1, 2020

A Record Week on Wall Street For Dividend Increases

Last week was a record on Wall Street ( at least for the 13 years that I have followed Dividend Growth Investing). There were 69 dividend increases announced by US based companies according to my data source. That list doesn’t even include dividend increases from many prominent Canadian Companies such as the Toronto-Dominion Bank for example.

While the rest of the world was panicking about the spread of the Corona Virus, corporate boards were busy announcing divided hikes to their shareholders. It also looks like corporate boards were also busy buying back stock as well. I like looking at dividend increases every week, as part of my monitoring process.

I understand that the virus is a serious threat to global health, and I am in no way shape of form trying to downplay the risks involved. A lot of people are in quarantine, and the virus is still spreading quickly and is not contained yet. This can cause disruptions in the world economy. I saw plenty of folks stocking up on supplies in my local stores, so I understand how scary it all looks. I do believe that humanity will overcome these obstacles, even if there is short-term pain ( which may last weeks, to months or even an year per some experts).

Stock prices are falling and there are more values than just ten days ago. I believe that the future retirement income is on sale. That doesn’t mean that stock prices can’t or won’t go down further from here. But since I am in a position to put money to work on a regular basis, I invested some money last week. When I have money to invest, I will invest it again.

Either way, I found it very interesting that corporate boards kept raising dividends last week, even as panicked investors were pushing stock prices lower.

I went through the list of dividend increases, and narrowed it down to focus only on the companies with a ten year history of annual dividend increases. As a result, the list was narrowed down to twenty companies.

This list is not a recommendation to buy or sell anything of course. This is just a list of companies with long histories of annual dividend increases, which happened to increase dividends last week.
In order to come up with a list of companies for further research, I would look at the following screening criteria:

1) A ten year history of annual dividend increases
2) A forward P/E ratio below 20
3) A dividend payout ratio below 60%
4) Annual dividend growth exceeding 3%

This screen reduced the number of companies for further research to 14. The results are listed here:

The next step in the process is more manual. It involves reviewing trends in earnings per share, dividends per share, payout ratios, revenues etc over the past decade, and understanding the company and business model. This is a subjective step, because different investors with different points of view could come out with diametrically opposite conclusions from the same set of data.

You may want to review my analysis of Home-Depot for a sample of how I analyze companies.

Thank you for reading!

Relevant Articles:

Home Depot (HD) Dividend Stock Analysis
How to read my weekly dividend increase reports
My Entry Criteria for Dividend Stocks
How to invest in dividend stocks
17 Dividend Increases For Further Analysis

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