I review the list of dividend increases each week as part of my monitoring process. I use this process to review existing holdings and potentially uncover more companies for further research.
That is just one part of my overall monitoring process however.
While I may report on some of the increases, that doesn't mean these companies are automatic buys. The intelligent dividend growth investor would have to apply a set of logical criteria to focus on the promising companies from a fundamental perspective, and then apply another net to catch them at a hopefully good valuation.
In my case, I apply a set of criteria to decide whether I research a company further or not.
Dividend increases do provide signaling value to me in my research process, because they basically provide an input into managements thoughts about the business prospects. It's great to bump this up against past results and my expectations. Then combine with other data I track.
Basically increases are one of the tools that help me monitor existing holdings, monitor the heart of dividend growth investing universe &potentially uncover companies for further research
I wanted to point all that for context, as my sharing increases always seem to confuse someone who is new to my work.
During the past week, there were 69 companies which raised dividends in the US. I reviewed each increase, and narrowed it down to more established dividend growth companies. I define established dividend growth companies as those that have at least a ten year streak of consecutive annual dividend increases under their belt.
In the old days, when we still had a recession every five years or so, a ten year requirement of annual dividend increases was a test of whether a company is cyclical or not. Today, when recessions are happening once every decade, if not even longer, this is perhaps sounds too conservative. However, we still need to establish a baseline for quality. I would argue that someone who is focusing on long-term investing, spanning decades, is looking for companies that can hopefully compound earnings, dividends and intrinsic value for decades. Rather than look for quick hits that may rise quickly to the sun, only to have their wings burned off just as quickly.
Anywho, of the 69 companies that raised dividends last week, only 25 have managed to grow dividends for at least a decade. The companies that both raised dividends last week and have a ten year track record of annual dividend increases are listed below:
As I mentioned above, this is just the first step in narrowing down an investment popiulation. While this weekly dividend increase exercise is helpful as part of the monitoring process, it is also a good exercise in applying criteria to narrow down any list of companies to an investable universe.
