Slowing Dividend Increases?

[Kerim]

This WSJ article, discussing a "a deceleration in dividend increases," is getting some attention over at SA. The core of the article is as follows:

Quote:For 2016, 84 companies have made a positive move (all in the form of increases this year) versus 106 positive actions in the first two months of 2015.Furthermore, for those companies increasing their payouts, they’ve done so by 10% on average this year, compared to 13% in 2015, 18% in 2014 and 20% in 2013, by Mr. Silverblatt’s calculations.

After years of handing back cash to investors via dividends, firms are now hitting pause as they seemingly try to build up their cash and assess where the economy is headed.

I'm not sure that any DGI worth his or her salt expects dividend growth to be completely smooth. There will be good years and stingy years. Moreover, the article does not discuss which universe of stocks is under scrutiny. I suspect that if you narrowed the focus from "all stocks" to "stocks favored by DG investors," the number of increases in 2016 so far would look very close to the number in 2015. In other words, this data would seem to include every little company that increased its dividend in the relevant period in 2015, whether it has a history of predictable dividend growth or not.

[Roadmap2Retire]

(03-09-2016, 09:40 AM)Kerim Wrote: This WSJ article, discussing a "a deceleration in dividend increases," is getting some attention over at SA. The core of the article is as follows:

Quote:For 2016, 84 companies have made a positive move (all in the form of increases this year) versus 106 positive actions in the first two months of 2015.Furthermore, for those companies increasing their payouts, they’ve done so by 10% on average this year, compared to 13% in 2015, 18% in 2014 and 20% in 2013, by Mr. Silverblatt’s calculations.

After years of handing back cash to investors via dividends, firms are now hitting pause as they seemingly try to build up their cash and assess where the economy is headed.

I'm not sure that any DGI worth his or her salt expects dividend growth to be completely smooth. There will be good years and stingy years. Moreover, the article does not discuss which universe of stocks is under scrutiny. I suspect that if you narrowed the focus from "all stocks" to "stocks favored by DG investors," the number of increases in 2016 so far would look very close to the number in 2015. In other words, this data would seem to include every little company that increased its dividend in the relevant period in 2015, whether it has a history of predictable dividend growth or not.

That was a terrible article. Like you mentioned, there are no details of which companies were considered - and what the data points were. 

I remember a better article from David Van Knapp on Seeking Alpha from a year or two ago where he profiled the CCC list to list companies with slowing dividend growths. Not sure if I can find it, but I can give it a try.

EDIT: Found it: http://seekingalpha.com/article/3077946-...owth-rates

[benjamen]

(03-09-2016, 09:40 AM)Kerim Wrote: This WSJ article, discussing a "a deceleration in dividend increases," is getting some attention over at SA. The core of the article is as follows:

Quote:For 2016, 84 companies have made a positive move (all in the form of increases this year) versus 106 positive actions in the first two months of 2015.Furthermore, for those companies increasing their payouts, they’ve done so by 10% on average this year, compared to 13% in 2015, 18% in 2014 and 20% in 2013, by Mr. Silverblatt’s calculations.

After years of handing back cash to investors via dividends, firms are now hitting pause as they seemingly try to build up their cash and assess where the economy is headed.

I'm not sure that any DGI worth his or her salt expects dividend growth to be completely smooth. There will be good years and stingy years. Moreover, the article does not discuss which universe of stocks is under scrutiny. I suspect that if you narrowed the focus from "all stocks" to "stocks favored by DG investors," the number of increases in 2016 so far would look very close to the number in 2015. In other words, this data would seem to include every little company that increased its dividend in the relevant period in 2015, whether it has a history of predictable dividend growth or not.

Looking at the CCC list maintained by David Fish, I do see a trend of lower dividend raises.
All CCC:
2011 vs 2010: 18.6%
2012 vs 2011: 16.5%
2013 vs 2012: 13.8%
2014 vs 2013: 12.5%
2015 vs 2014: 11.0%

It is more flat for Champions:
2011 vs 2010: 6.7%
2012 vs 2011: 6.7%
2013 vs 2012: 8.2%
2014 vs 2013: 8.4%
2015 vs 2014: 7.1%

[benjamen]

Looking at year over year dividend raises from 1999vs2000 through 2014vs2015 (average, standard deviation):
Champions: 7.33%, 1.82%
Contenders: 9.92%, 4.98%
Challengers:12.6%, 9.34%
All CCC: 10.1%, 5.33%

I was going to insert a graph that shows past 16 year trend for all.  How do I copy in a graph or picture from excel?

[Kerim]

(03-09-2016, 01:06 PM)benjamen Wrote: I was going to insert a graph that shows past 16 year trend for all.  How do I copy in a graph or picture from excel?

I usually just take a screenshot of the image I want, then include it in my post as an image.

[benjamen]

   

We see much more dividend growth volatility with the Contenders and Challengers, while Champions consistently average 5-10% dividend growth.

[Kerim]

Nice work, benjamen! That is really interesting. Took me a minute to get that time is moving right to left, but once I realized that, it looks like recent dividend growth is just fine. ( know the article was discussing the first two months of 2016, but still...)

[benjamen]

(03-09-2016, 08:48 PM)Kerim Wrote: Nice work, benjamen! That is really interesting. Took me a minute to get that time is moving right to left, but once I realized that, it looks like recent dividend growth is just fine. ( know the article was discussing the first two months of 2016, but still...)

Looking at the Feb16 end data from David Fish, it does look like raises thus far this year haven't been great, but it still looks like the champions are averaging around a 5% dividend raise this year.  Challenger and Contenders are trending in the 6-7% range.

[Dividend Watcher]

My business plan calls for greater than 6% dividend growth across each of our portfolios for the year. Since transitioning to DGI in the Great Recession, we've been far in excess of that without really trying even with the cuts and freezes. This year may be a little tight in my wife's portfolio with both COP and ESV's cuts but I believe it's achievable.

[cannew]

As mentioned, nothing goes straight up or down or even follows the market.  I stopped using the market or others expectations.  As long as the companies I own continue to pay a dividend and grow the dividend, I'm happy.  If there is no growth, is there a valid reason, such as the Financial crisis where the Cdn banks held the dividend with no growth.  By reinvesting most of my dividends I'm automatically generating some growth and the dividend increase add to them.  It's the Income growth for the year I want to see.  If it's 6%, 8% or more than 10%, great, as long as it keeps growing each year.

[EricL]

"8 Champion Stocks Destined For Declining Dividend Growth"

[Dividend Watcher]

Good article, Eric.