Monday, June 13, 2022

Are Dividend Increases Beating Inflation in 2022?

The US stock market has been turbulent recently. As a Dividend Growth Investor, I usually ignore stock price fluctuations, unless I am looking to buy a quality stock at a discount. As a long-term investor, I focus on growing my dividend income. Dividends are more stable, predictable and reliable than stock prices. Dividends also tend to grow above the rate of inflation over time.

The stability and predictability of dividend payments make them an ideal source of income for retirees. While share prices can fluctuate, I can sleep well at night, knowing that my dividends are coming in, and most likely increasing as well.

In previous reviews, I have found that dividends in the US tend to grow above the rate of inflation over time. You may remember this chart from this post:

Source: How dividends protect income from inflation

With inflation rising, I decided to take a more granular look at US Equities, and see how they are faring. It looks that so far this year, dividend stocks are able to maintain purchasing power. Of course, the year is still young. If we get a recession, it is very likely that dividend growth could slow down. Alternatively, it can also accelerate as companies pass on cost increases to customers.

I went ahead and obtained a listing of all companies in the S&P 500, and then looked at their dividend actions so far in 2022. This review covers all companies that are members of S&P 500, and tracks all dividend actions between January 1 and June 9th.

There have been 193 dividend increases, 5 initial dividends and 5 dividend cuts so far in 2022. You can view a summary of dividend actions by sector in the table below:

Next, I drilled down on the list of dividend increases. I wanted to see how many dividend increases so far this year exceeded 8%. While inflation is 8.60%, I used 8% as the number, because the inflation number has been increasing in 2022. I didn't want to unjustly penalize companies that raised dividends earlier in the year. I would argue if we are arguing about 0.60% difference, we are nitpicking and splitting hairs. 

Anyway, out of the 193 dividend increases so far in 2022, it looks like 117 increases were higher than 8%. This is good to know.

A more interesting view is to look at the list of dividend aristocrats. There were 32 dividend increases so far in 2022. 

It looks like 13 companies raised dividends by more than 8%. The rest of the companies raised dividends by less than 8%. The average dividend increase is 7.46% however.

There are 31 dividend aristocrats, which have not raised dividends so far in 2022. I have listed them below, and also included the months in which these companies have raised dividends in 2021. If history is any guide, these companies usually tend to announce their dividend increases around the same time each year.

On a side note, this data comes straight from S&P Global. They do not seem to have included Realty Income (O) in their dividend increases lists. It did raise dividends slightly in March from $0.2465 to $0.247, but I think it would raise dividends a few more times in 2022.

All the data is from S&P Global.

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