Welcome to my latest weekly review of dividend increases.
As part of my monitoring process, I review dividend increases that occured over the past week.
I then narrow my attention down to the companies which both raised dividends last week AND have at least a ten year track record of annual dividend increases under their belt.
A company that can grow dividends for many years in a row is usually one with strong competitive advantages, and ability to reinvest and high rates of return. Those types of quality companies can manage to grow the business, while also generating a rising stream of cashflows to share with shareholderds.
Hence, I tend to keep a close look at companies that have increased dividends for many years in a row. Reviewing recent dividend increases is an extension of that process.
This of course is just one step of the review and monitoring process that I follow. However, it is also good snapshot of the the process I use to quickly decide if a company is worth putting on the list for further research, or discarded.
I tend to look for dividend increases, which are supported by growth in earnings per share. Without that, future dividend growth will be limited.
I also like to review changes in dividend growth, relative to the historical average, to get clues as to where the winds are blowing. Dividend increases are a good signal from managements, which are keenly aware of the competitive dynamics in their industries. As a result, those dividend increases represent a good signaling mechanism as to howt those management teams are expecting the business to perform in the near term.
Last but not least, it is important to determine whether the valuation is attractive or not. This should usually be done at the end. Valuation only matters of course if the business is determined to be of sound quality fundamentally speaking, in the previous steps.
Over the past week, there were thirteen companies that both raised dividends to shareholders AND also have a minimum of ten year track record of annual dividend increases. You can see the companies, and my review of them below:
Note that I look at forward returns as a function of:
1. Dividend Yields
2. Growth in Earnings per Share
3. Change in valuation
The first two items are what drives most of long-term total returns in equities over the long run. The change in valuation matters the least in the long run.
However, in the short run, changes in valuation matter much more than growth in earnings per share and dividends. By "short-run" I mean periods of less than say 5 - 10 years or so. This is where in the short-run, earnings multiples can go really high if the market is euphoric OR really low if the market is depressed. One can potentially take advantage of these opportunities in the short-run.
However, the real wealth is built by investing in a good business, at a good price, that keeps growing earnings, dividends and intrinsic value over time.
This mirrors Warren Buffett's quote that in the short-run, the market is a voting machine, but in the long-run, it is a weighting machine.
Thank you for reading!
