Virtual dividend increases

[Forticus]

How do you handle stocks that show dividend increases over 10+ years but at a closer look they didn't increase for 6 or 7 quarters?
Do you skip such stocks? Do you care as long as 3 years show 3 different dividend totals? 

For example, I saw this with SU.TO and now with AMP.
While fastgraphs shows 1st dividend in 2005 and increases up to now the 
hompage of AMP http://ir.ameriprise.com/dividends  (slider at "previous" to the left + "apply")
shows 0,17 from Q3 2008 until Q1 2010 - thats 7 quarters no increase.

So is it a maintainer or am I nitpicking ? 

Please, AMP is just an example.

[DividendGarden]

I think the majority of us would still consider those stocks as DGI investments. I own AMP and have for many years, to follow on your example. Some companies go five or six quarters without an increase to help conserve cash for other uses, but the net effect is that the annual dividend is still greater than the prior year.

[Dividend Watcher]

United Technologies (UTX) has used the 5 quarters before a raise schedule for a while. Other companies, as you mentioned, have done the same thing. It doesn't bother me so much.

I've even learned to be patient with companies that freeze for a while such as Intel (INTC), Deere (DE) and Chevron (CVX) as long as the business doesn't seem permanently impaired and they have a good record of rewarding shareholders when times were good.

You're not nitpicking. If you have reservations about a company that does that, then don't invest or sell. That feeling could sabotage managing your portfolio when you have those nagging concerns.

[Forticus]

Thanks for your views on this.
no reservations yet, but was thinking whether I should build some.
It's just that when ever some writes about " XX years of consecutive increases of dividends" I map it to "every 4th quarter".
The Prussian half of my genes sometimes superimposes a ruler on what I see. I should probably KISS it.

(It's not the AMP thread but ... Monday is record date for the current increase.)

[crimsonghost747]

personally, I really don't care. I do look into it, to see what they have done in the past, but it's not something that has a big effect on my investment decision. I don't even mind it if they have a year or two or no increase... it all depends on why it happened.

I've always been a bit skeptical of the "need" to increase the dividend payment every year. I certainly agree that, over the long term, the dividend has to increase but the fact that is should be once per calendar year or once per 4 quarters is often just companies increasing it to keep the streak going, rather than increasing it because they see it as the best use of their cash. I believe a company should use their cash in a way that the management believes will be the most beneficial for the shareholders.

I'll throw a few examples out here.
Big oil companies. The price of oil plummeted, and certain companies decided to keep the dividends as it is (or even increase it). They couldn't really afford to do so, but they figured to take debt and pay with that money, just to keep the streak going. Seems a bit silly to me to take debt in order to distribute cash to shareholders... the government has a habit of taking their fair (or not so fair) share as tax, so in the end you're just losing cash this way.

Another example is a situation where, for some reason like a global recession, a company is doing badly for a moment. They aren't making much money, and so the stock price has also plummeted. If they believe the situation will correct itself... wouldn't it be WAY more beneficial to the shareholders to use the extra cash to buy back their own stock at ridiculously low prices, rather than dishing it out to the owners just to keep the streak going?

We all love dividend increases, but just because they are not exactly 365 days apart doesn't necessarily mean that something is wrong.

[Dividend Watcher]

But . . .


If the company is humming along, maybe even with slow growth, and the payout ratio is low enough (say less than 60-70%), and senior management takes a raise (which for most large companies has been much larger percentage-wise than they give the rest of their own employees and much greater than inflation) then I certainly expect them to share some of that with me, one of the owners.