Dividend Aristocrats: A Comprehensive View

There tends to be much debate on whether dividends are a critical factor in determining the suitability of a particular investment. One fact is clear though and that is since 1926 the dividend component of the S&P 500 has accounted for one-third of the index's total return

Dividend Aristocrats have outperformed the S&P 500 Index on both a return basis and with less risk (beta).

The ability of management to maintain stable or increasing dividends indicate the quality of the firm’s earnings and its growth prospects.














The math behind compounding shows if one looses less in a down market, it takes a lower return to get back to even. In essence, if one looses less in the down market period, the portfolio will have more invested when the market turns around and moves higher.

http://seekingalpha.com/article/183829-dividend-aristocrats-a-comprehensive-view

More Gems from Buffett

Screen as many stocks as possible.  You will find a good investment among these many stocks.

The moment you find value in a good stock, buy and don't wait hoping to find a better one.

Cash is the worst form of investment.  You need to keep some cash so that your future is not determined by others.

Imagine being a farmer with your own farm.  The farm is productive but every 10 years, there are 2 severe drought years.  Do you sell your farm during those years?  No.  Similarly, in investing, be prepared for these bad years.


[My comment: In stock market investing, one can expect on average a bad year (a bear market) in every 5 years.]

The Principles of Dividend Investing

The point is that dividend growth followed earnings growth.















http://seekingalpha.com/article/176988-the-principles-of-dividend-investing

Relative Contributions of Price Returns and Dividend Returns to Total Returns over the Decades

Stocks that pay dividends provide a nice inflation hedge since their revenues and net income would be affected by an increase in overall prices paid by consumers. Dividends soften losses during bear markets, and they provide the only sources for investment gains in troublesome times. In addition, dividend income takes away the need to sell large chunks of your portfolio in a declining market. Retirement income could be solely derived from dividends and their growth would compensate the dividend investor for the erosion in the purchasing power of the dollar.

If a retiree holds a diversified portfolio of stocks which have the ability to grow their dividend payments over time, they would be well prepared for retirement. They should be focusing on stocks with high yields and ability to grow dividends; stocks with average yields but with above average dividend growth and some domestic and foreign index funds for diversification.


http://www.dividendgrowthinvestor.com/2008/03/case-for-dividend-investing-in.html

The power of dividends is substantial, especially when you reinvest them.

This chart, from Bernstein Global Wealth Management, demonstrates how reinvesting dividends can substantially improve your total returns.

http://www.investmentu.com/2008/April/mark-skousen.html

The Sweet Spot of Dividend Investing

The green area in the middle is the sweet spot: Initial dividend yields of between about 3% and 9%, combined with dividend growth rates of about 4% to 17%. Those are generally sustainable numbers, and it is where we will find most of the best dividend stocks for long-term investing.

In long-term dividend investing, one needs to control risk in many areas. Risk comes in many forms: selecting unsound companies; purchasing companies whose dividends are in peril; creating a portfolio that is insufficiently diversified; and so on.


Two important areas of risk to a long-term dividend strategy are the initial yield and expected growth rate of the dividend itself.


If you start out with too low a yield, it will take many years for the dividend to grow to where it provides a worthwhile return on your original investment. On the other hand, if you start out with too high a yield, it may well be that the dividend is unsustainable and in peril.


If the company typically increases its dividend at too slow a rate, again the dividend will take too long to grow into a desirable return. On the other hand, if you anticipate too fast a growth rate, the company may not achieve it.Plotting these two characteristics against each other--initial yield and anticipated dividend growth rate--gives us a diagram of the "sweet spot" in dividend investing.

Read more here:  The Sweet Spot of Dividend Investing

Relevant Articles:

- 10 by 10: A New Way to Look at Yield and Dividend Growth
- Yield on Cost Matters
- The Dividend Edge
- My Dividend Growth Plan - Strategy


This company grew its earnings and dividends healthily over the years. The point is that dividend growth followed earnings growth.



http://seekingalpha.com/article/176988-the-principles-of-dividend-investing

The DJIA Dividend Yield Points the Way

The Dow Jones Industrials Average dividend yield, for sixty years was a key bull and bear market-timing indicator.

http://www.gold-eagle.com/editorials_08/lundeen011009.html

Stocks that pay dividends have done better historically

Dividend Yield Investing

The dividend growth of this company is not fantastic.

There are also companies in Bursa paying increasing dividend over the years quite similar to the above company.

Stock Market vs. Dividend Yield

The Dividend Yield is another way to measure values in the stock market. This is the total dollar amount of the dividends paid on the DJIA stocks divided by the value of the DJIA.

Looking back at over 100 years of data for the DJIA, it is clear that stocks become over valued, i.e. too expensive, when their Dividend Yields are less than 4%. These low Dividend Yields represent major tops, and prices fall from there until Dividend Yields return to the long-term average of 6%, and then continue beyond that to a level where they are under valued, i.e. cheap, around 8-10%.

The 1929 top was formed at a DY of 3.5%, which resulted in a 3-year bear market that bottomed in 1932 at a DY of 17%.

The 1966 top was formed at a DY of 3.5%, which resulted in a 16-year bear market that bottomed in 1982 at a DY of 8%.

The 2000 top was formed at a DY of 1.2%; 66% lower than the top in 1929!! Currently, the DY stands at 2.5%, which is hardly cheap!! It is still beyond the level that formed the 1929 and 1966 tops!

History has shown that after a major top, a multi-year bear market should take prices back to a DY of about 10%, in order to work off the excesses of the previous bull market. This means that, by this measure, the DJIA should eventually drop to 3,500-4,000. That's when stocks will be cheap again!  


http://www.thefinancialhelpcenter.com/Stock-Market/Are-Stocks-Cheap.html

****The power of dividends is pretty obvious!

Investing in stocks that continually increase their dividends has the dramatic effect of consistently giving investors a raise each and every year. I have kept track of my own personal dividend income since really focusing on dividend growth as a strategy in 2005. Shooting forward almost 3 years and my dividend income has gone from $727 per year to its current $1320 per year.

The growth in this dividend income has come from two sources.

1. The first and most obvious is that I have continued to add dividend growth stocks to my portfolio. Every time that I add a stock the resulting income can be quite substantial. For example when I added Coca-Cola in March 2005 I immediately added almost $30 in dividend income per year to my earnings.
2. The second and less obvious source of the increase in dividend income is the dividend increases that my dividend stocks have done every year. This is metric that can move quite slowly at first, sometimes feeling like you are getting nowhere. However, over time as dividends are reinvested into more stock and the dividends are raised then the results can be quite dramatic. For example, in June 2006 I bought 16.4821 shares of Wal-Mart when it was throwing off $0.67 per share in dividends. Today, with no additional money added to the stock I now hold 16.9761 shares and the yearly dividend payment from the company is $0.95 per share. My hypothesis is that in 20 years from now the yearly dividends will have risen dramatically and my reinvested shares will be throwing off a very substantial sum of money – enough to retire on.

To create a reminder of the power of my strategy during times when dividend stocks are not performing as well in the market, I have created a quick and dirty chart that shows the trend in my dividend income. Every once in a while I create a new data point with my current dividend income and inevitably it shows my income rising.



http://www.thedividendguyblog.com/a-review-of-my-yearly-dividend-income/

Dividends for Top Bursa Malaysia Companies

It shows the normal dividends (Interim & Final) and any special dividend as well.
http://www.horizon.my/2008/11/dividends-for-top-bursa-malaysia-companies/

The results of reinvesting dividends

http://www.dividend.com/dividend-stock-library/dividend_reinvestment_plans.php

S&P 500 Dividend Yield versus 10 Year Treasury Yield

The 10 year U.S. Treasury yield has been greater than the S&P 500 Index dividend yield since 1958. However, in November 2008 the roles reversed when the S&P 500 yielded more than 10 year Treasuries. The chart above compares these yields from November 1993 to November 2008. Why do stocks, as represented by the S&P 500 Index, now yield more than bonds, as represented by the U.S. 10 Year Treasury?

Experts differ on the reasons, but one reason is simply market forces. The 10 year U.S. Treasury yield has been driven down as investors have moved out of stocks and into the safety of U.S. Treasuries, driving bond prices up. Bond yields go down when bond prices go up. The S&P 500 dividend yield has increased due to the recent sharp declines in stock prices. Dividend yield represents the trailing annual dividend per share divided by the current share price. Current stock prices have dropped at such a sharp rate that when dividing trailing annual dividends by current price, the dividend yield increased.

http://www.icmarc.org/xp/rc/marketview/chart/2008/20081212SP500DividendYield.html

An Increasing Dividend, but Lower Dividend Yield?

The graph above compares the annual cash dividend per share for all of the S&P 500 companies to their dividend yield since 1960. While it is evident that companies increased their cash dividends per share over time, it is also just as clear that their dividend yield fell. Many investors use dividend yield to find the percentage of a stock’s purchase price that the company will return to shareholders in dividends. Dividend yield can be calculated by dividing a stock’s annual dividend by its share price. For example, if a stock pays an annual dividend of $2 and is trading at $40 a share, it would have a yield of 5%. In 1987, the dividend yield on the S&P 500 Index reached 3.17% and over the following 20 years, the dividend yield declined to 1.77% during 2006. In the late 90's and early-to-mid 00’s, increases in stock price significantly outpaced the increases in dividends, which sent the S&P 500 dividend yield down. According to The Wall Street Journal, one of the reasons dividends grew at a slower pace than stock prices was due in part to companies reinvesting profits back into company operations instead of distributing dividends to shareholders. Although dividend yields for the S&P 500 Index remain lower than the historical average, dividends continue to increase shareholder wealth by providing a source of current income and total return for the investor.


http://www.icmarc.org/xp/rc/marketview/chart/2007/20070914dividendyield.html