There is an old Wall Street maxim that the safest dividend
is the one that’s just been raised. Which is why if you’re not familiar with
Dividend Achievers, you should be.
You can always find that occasional company that continued
raising its dividend right up until it cut it (Kinder Morgan in 2015). But
generally speaking, it’s safe to say that a dividend stock aggressively raising
its payout is a healthy company and one that is justifiably confident about its
future.
Earnings per share can be aggressively manipulated, as can
reported revenues. Even the cash flow statement can be suspect because it
ultimately pulls most of its key data points from the income statement, which
can be a work of creative fiction.
Paying a dividend requires actual cash on hand. And a
dividend hike implies that management is confident that there will be a lot
more cash coming down the pipeline to support a higher dividend in the quarters
ahead.
But even when it comes to dividends, you have to look out
for chicanery and focus on quality. That means paying the dividend out of real
profits and cash flows, not debt or new share issuance. As forensic accountant
John Del Vecchio, co-manager of the AdvisorShares Ranger Equity Bear ETF
(HDGE), says, “Dividends are a distribution of profits; a way for a company to
reward its patient shareholders. But a dividend paid from debt or equity
proceeds isn’t a dividend at all, but rather a return of capital. Don’t be
fooled by a company returning your own money to you while calling it a
dividend.”
Today, we’re going to take a look at Dividend Achievers –
companies with a history of raising their annual dividends for a minimum of 10
consecutive years – that aren’t just providing token upticks. The idea is that
we’re limiting our pool to stable companies with a long history of safely
delivering the goods, but that also are well-positioned for growth in the
immediate future.
Comments
Post a Comment