I review the list of dividend increases weekly, as part of my portfolio monitoring process. I usually narrow the list down to companies with at least a ten year history of annual dividend increases.
The next involves reviewing each company in sufficient detail, in order to determine if dividend increases are based on solid fundamentals. This review includes looking at trends in earnings per share, dividends per share, payout ratios as good start. The goal is to determine the likelihood of future dividend increases.The last review point includes valuation. In general, I try to avoid overpaying for companies. To me it used to mean not paying more than 20 times earnings for a stock. Valuation is more art than science however ( as is investing in general). This is why it is important to look at relative valuations and growth in the opportunity set, not just focus on absolute numbers.
These steps keep me in fighting shape, and help me monitor as many companies in the investable dividend growth universe in advance. This helps me to be prepared when the right opportunity at the right price comes along.
Over the past week, there were three companies which raised dividends to shareholders. Each company has a minimum ten year streak of annual dividend increases under its belt. The companies include:
This of course is just a list, not a recommendation.
When I review companies, I look at ten year trends in:
1) Earnings per share
2) Dividend payout ratio
3) Dividends per share
4) Valuation
Since I have some experience evaluating dividend companies, I also modify my criteria based on the environment we are in and the availability of quality companies. If I see a company with a strong business model and certain characteristics that I like, I may require a dividend streak that is lower than a decade. I have also found success in looking beyond screening criteria by purchasing stocks a little above the borders contained in a screen.
It is important to be flexible, without being too lenient.
You may like this analysis of Realty Income (O) as an example of how I review companies.
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