So how does one measure dividend history when spin-offs are involved? I don't think there is a clear answer, but there is some guidance.In [url=http://www.financialwisdomforum.org/forum/viewtopic.php?p=570427#p570427]this post[/url] Taggart wrote:The company can say all it wants about 27 consecutive years of dividend increases, but with the Enerflex spinoff back in 2011 (see above), it still looks like a dividend cut back then, at least to me it does.In [url=http://www.financialwisdomforum.org/forum/viewtopic.php?p=570407#p570407]this post[/url] Peculiar_Investor wrote:Nice to read that Toromont Announces 2015 Results and 6% Increase in Quarterly Dividend27 consecutive years of dividend increases is a great track record for a Canadian company. I've been on the receiving end of increases for 11 years and counting.Considering the Company's solid financial position, cash flows and balances, and positive long- term outlook, the Board of Directors today increased the quarterly dividend to 18 cents per share, representing a 6% increase. The next dividend is payable April 1, 2016 to shareholders of record at the close of business on March 10, 2016. The Company has paid dividends every year since going public in 1968 and this represents the 27th consecutive year of increases.
S&P maintains dividend aristocrat lists that might be helpful to review for some context.
- S&P 500 Dividend Aristocrats - S&P 500® Dividend Aristocrats® measure the performance S&P 500 companies that have increased dividends every year for the last 25 consecutive years.
- S&P/TSX Canadian Dividend Aristocrats - S&P/TSX Canadian Dividend Aristocrats® measure the performance companies included in the S&P Canada BMI that have followed a policy of consistently increasing dividends every year for at least five years.
Here is what S&P 500 Dividend Aristocrats Methodology
Almost looks like it should be called the ABT/ABBV rule. ADP is another dividend aristocrat with 41 consecutive years of increases, but during that time they've spun-off at least two companies (CDK Global and Broadridge).S&P wrote:For spin-offs occurring after January 1, 2013, the yearly dividend increase history of the parent company is assigned to both the parent and spun-off company on the spin-off effective date. To determine annual dividend payments, the dividends of the parent and spun-off companies are combined until a full annual cycle of dividend payments is available for both post-spin-off companies. Subsequent dividend comparisons are based on the annual dividend amounts of each respective company.
I checked the S&P/TSX Canadian Dividend Aristocrats Index Methodology and there is no specific rule for spin-offs as in the US case. Somewhat strangely, the S&P/TSX Canadian Dividend Aristocrats list doesn't include Toromont, but includes the spun-off Enerflex. I would suggest that if the US methodology was applied, then Toromont probably should be included in the list and it's on that basis I can understand their claim to 27 consecutive years of dividend increases.
Look at the recent case with Potash Corp. (POT). On January 22, 2016 S&P Dow Jones Indices Announces the Annual Review of S&P/TSX Canadian Dividend Aristocrats Index and POT is added effective at the open on Monday, February 1, 2016. Less than a week later, Potash announced a woeful 2016 outlook and cut its dividend.
In a rather unusual development, the S&P Index Committee discussed the matter and dropped Potash Corp. from the index before it could even be formally added on Monday (Feb. 1), the day the changes went into effect. (apparently there was no press release, at least that I can find).
Clearly there is no hard and fast rule that covers all corporate circumstances and it's worthwhile for the educated investor to look behind the headlines and numbers to make sure they trust but verify the facts that they are using to formulate their investment thesis.