A reader asked me the following question, after reading my post on slowing dividend growth:
"I was wondering how a company could have 53 consecutive annual dividend increase and yet go close to 30 months between raises? ( as is the case with CL between 83 and 84, among other dates as well)"
This is a good question. The best way to answer it, is to look at actual data. Actually, breaking down the data could be helpful. Most companies in the US pay dividends every quarter, with some exceptions. Therefore, the typical dividend growth company such as Colgate-Palmolive (CL) would pay dividends four times per year.
Most companies on the dividend champion lists tend to announce increases in their dividends once per year, which usually happens during the same time each year. A company like Colgate-Palmolive does not need to increase dividends every single year however. If they time their increases correctly, they could manage to announce hikes in the quarterly payments once every two years, and still have annual dividend payments go up.
Let’s look at an actual example below: (source: Colgate-Palmolive)
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1999 Declared Ex-Date Record Date Payable Dividend Per Share
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|||||
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1st Quarter
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01/14/99
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01/22/99
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01/26/99
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02/16/99
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0.06875
|
|
2nd Quarter
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03/11/99
|
04/22/99
|
04/26/99
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05/17/99
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0.06875
|
|
3rd Quarter
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07/08/99
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07/22/99
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07/26/99
|
08/16/99
|
0.07875
|
|
4th Quarter
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10/14/99
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10/22/99
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10/26/99
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11/15/99
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0.07875
|
|
1998
|
|||||
|
1st Quarter
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01/08/98
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01/23/98
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01/27/98
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02/17/98
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0.06875
|
|
2nd Quarter
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03/05/98
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04/23/98
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04/27/98
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05/15/98
|
0.06875
|
|
3rd Quarter
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07/09/98
|
07/23/98
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07/27/98
|
08/17/98
|
0.06875
|
|
4th Quarter
|
10/08/98
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10/23/98
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10/27/98
|
11/16/98
|
0.06875
|
|
1997
|
|||||
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1st Quarter
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01/09/97
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01/23/97
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01/27/97
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02/17/97
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0.05875
|
|
2nd Quarter
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03/06/97
|
04/23/97
|
04/25/97
|
05/15/97
|
0.06875
|
|
3rd Quarter
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07/10/97
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07/23/97
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07/25/97
|
08/15/97
|
0.06875
|
|
4th Quarter
|
10/09/97
|
10/23/97
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10/27/97
|
11/17/97
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0.06875
|
|
1996
|
|||||
|
1st Quarter
|
01/11/96
|
01/23/96
|
01/25/96
|
02/15/96
|
0.05875
|
|
2nd Quarter
|
03/14/96
|
04/23/96
|
04/25/96
|
05/15/96
|
0.05875
|
|
3rd Quarter
|
07/11/96
|
07/23/96
|
07/25/96
|
08/15/96
|
0.05875
|
|
4th Quarter
|
10/10/96
|
10/23/96
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10/25/96
|
11/15/96
|
0.05875
|
This table above shows the quarterly dividend payments for 1996 – 1999. You can see that Colgate-Palmolive has maintained a pretty consistent schedule of paying out dividends to shareholders in the middle of every February, May, August and November. This is why I say that dividend payments are more stable and predictable than capital gains, and therefore it is easier to model as an income source for my retirement.
You can see that the quarterly dividend in 1996 was 5.875 cents/share. The company sent four payments of 5.875 cents/share for a total of 23.50 cent/share for 1996.
You can see that in 1997, the company raised its quarterly dividends to 6.875 cents/share from 5.875 cents/share that was payable in May 1997. Because of the timing of the dividend hike however, the company ended up sending only three dividend payments at the new rate of 6.875 cents/share. In essence, there was one payment at the old rate of 5.875 cents/share and three payments at the new rate of 6.875 cents/share. The total dividends paid per a share of Colgate-Palmolive stock in 1997 amounted to 26.50 cents. That’s a 12.77% increase over the annual dividends paid in 1996.
In 1998, Colgate-Palmolive kept its quarterly dividend unchanged at 6.875 cents/share. As expected, shareholders received this payment every February, May, August and November. The company paid out a total of 27.50 cents/share in dividends to its shareholders. That’s a 3.77% increase over the annual dividends paid in 1997.
Colgate-Palmolive sent shareholders a payment of 6.875 cents/share in February and May of 1999. This payment was unchanged, and had been unchanged for 8 quarters in a row. However, the company decided to hike dividends to 7.875 cents/share for the August and November dividend payments. As a result, the company ended up paying of a total of 29.50 cents/share in annual dividends to its shareholders in 1999. That’s a 7.27% increase over the annual dividend paid in 1998.
As you can see from the examples above, the company raised its quarterly dividend every two years, and still managed to grow the annual dividend. As dividend investors, we do care about seeing our annual income growing over time. The faster the raises, the better of course. It is much better to get raises after four quarters, rather than after eight. That doesn’t invalidate the fact however, that shareholders of Colgate-Palmolive have received a growing annual dividend per share for over 53 years in a row.
After reviewing the dividend history of Colgate-Palmolive, you can see that the company ultimately started to raise dividends once per year in 2005. Before that, it managed to increase dividends every 8 quarters. The company still managed to grow annual dividends to shareholders due to the timing the dividend raises.
Full Disclosure: Long CL
Relevant Articles:
- Dividend income is more stable than capital gains
- Dividend Champions - The Best List for Dividend Investors
- Five Dividend Growth Investing Lessons I Have Learned Over the Years
- What should I do about slowing dividend growth?
- Eight Years Dividend Growth Investor
