Dividend hikes, aristocrats and methodology

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Peculiar_Investor
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Dividend hikes, aristocrats and methodology

Post by Peculiar_Investor »

Taggart brought up an interesting point that I think is worthy of further discussion.
In [url=http://www.financialwisdomforum.org/forum/viewtopic.php?p=570427#p570427]this post[/url] Taggart wrote:
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 Dividend
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.
27 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. :thumbsup:
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.
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.

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.
I've got a couple of holdings, ABT and ABBV, from the S&P 500 Dividend Aristocrats that illustrate the problem. ABBV was spun-off in 2013 from ABT, and thus their dividend history only goes back three years. Yet S&P considers them part of the S&P 500 companies that have increased dividends every year for the last 25 consecutive years. Is that the new math?

Here is what S&P 500 Dividend Aristocrats Methodology
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.
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).

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. :oops: 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.
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Re: Dividend hikes, aristocrats and methodology

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Does anyone follow the changes announced in S&P Dow Jones Indices Announces Changes to the S&P/TSX Canadian Dividend Aristocrats Index?

For dividend investors, does inclusion on the list influence your viewpoint on the stock?
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Re: Dividend hikes, aristocrats and methodology

Post by Taggart »

Peculiar_Investor wrote: 28 Jan 2020 07:55 Does anyone follow the changes announced in S&P Dow Jones Indices Announces Changes to the S&P/TSX Canadian Dividend Aristocrats Index?

For dividend investors, does inclusion on the list influence your viewpoint on the stock?
I don't even bother with the list of Canadian aristocrats. I've made my own and make changes to that list of stocks I'm interested in over the years. I do check the Canadian broad based indexes at Blackrock every so often to see if S&P has changed an equity to a different sector. Unfortunately, sometimes they do change which can and does cause portfolio disruption.
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Dividend aristocrats and dividend kings

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Prompt by posts/discussion in another topic (linked below) the term Dividend Aristocrat is quite commonly used.
Investopedia wrote:A company will be considered a dividend aristocrat if it raises its dividends consistently for at least the past 25 years.
There is a detailed methodology published for the S&P 500 Dividend Aristocrats.
S&P Dow Jones Indices wrote:To qualify for membership in the index, at each annual reconstitution a stock must satisfy the following
criteria:
  1. Be a member of the S&P 500.
    [*[Have increased total dividend per share amount every year for at least 25 consecutive years.
  2. Have a minimum float-adjusted market capitalization (FMC) of at least US$ 3 billion as of the rebalancing reference date.
  3. Have an average daily value traded (ADVT) of at least US$ 5 million for the three-months prior to the rebalancing reference date.
The Canadian version of the methodology can be found here
S&P Dow Jones Indices wrote:To qualify for membership in the S&P/TSX Canadian Dividend Aristocrats Index, S&P Dow Jones Indices
must first consider the company a “Dividend Aristocrat” by satisfying the following criteria:
  1. The company’s security is a common stock or income trust listed on the Toronto Stock Exchange (TSX) and a constituent of the S&P Canada BMI.
  2. The security has increased ordinary cash dividends every year for at least five years, but can maintain the same dividend for a maximum of two consecutive years within that five year period.
  3. The float-adjusted market capitalization of the security, at the time of the review, must be at least C$ 300 million. The float-adjusted market capitalization is calculated based on the volume weighted average price (VWAP) of the security on the TSX over the last 10 trading days of the month-end prior to the Annual Review.
  4. For index additions, the company must have increased its dividend in the first year of the prior five years of review for dividend growth. This rule does not apply for current index constituents.
From another topic, the term Dividend King was introduced, which I'd never seen before and it lead me to do some research and sharing.
BRIAN5000 wrote: 04 Nov 2021 15:39
Peculiar_Investor wrote: 04 Nov 2021 15:0750 consecutive years of dividend increases is a great track record.
That makes it a dividend King doesn't it? Wish these companies would stop buying back shares at near all time highs :(

A dividend king is a company whose common stock has posted an increased dividend payout at least once a year for at least 50 consecutive years. In addition, a dividend king must have a market capitalization of at least $3 billion.
I did find Investopedia's Dividend Aristocrats vs. Dividend Kings
Investopedia wrote:Similar to the dividend aristocrats, "dividend kings" are companies that are known for paying out dividends consistently over time. While a dividend aristocrat must be a member of the S&P 500 and have an increasing dividend payout over 25 years or more, to qualify as a dividend king a firm must only meet one hurdle: paying an increasing dividend consistently for at least 50 years.

Some dividend kings will also be dividend aristocrats, and not all aristocrats will be dividend kings (for instance, they have not been around for 50 years or are not in the S&P 500). It is less common for companies to consistently increase their dividends for over half a century, so the number of dividend kings tends to be fewer than their aristocrat cousins.
NormR wrote: 04 Nov 2021 15:41
BRIAN5000 wrote: 04 Nov 2021 15:39 In addition, a dividend king must have a market capitalization of at least $3 billion.
That's sort of an odd criteria. Do you happen to have a list of stocks that would be kings but for the market cap requirement?
The criteria seems to come from the S&P 500 Dividend Aristocrats Methodology document linked above, item #2.

FWIW, Google turned up Canadian Dividend Kings List - 50+ Years Annual Dividend Increase!. As of November 2, 2021 (the article date) there are not any Canadian Dividend Kings, yet.
Million Dollar Journey wrote:Here in Canada, we have a relatively small market and an even smaller list of quality dividend stocks. In a previous article about the top Canadian dividend growth stocks, you will see a number of dividend achievers (10 years + ), a handful of dividend aristocrats (25 years +), but no dividend kings in Canada (although FTS (46) and CU (47) are getting close).
The accompanying chart indicates that CU is now at 49 years and FTS is at 47 years.
Million Dollar Journey wrote:In the US, there are 30 dividend kings that have increased their dividend at least 50 years in a row.
The list is included in the linked article for those that might be interested.
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Re: Dividend aristocrats and dividend kings

Post by BRIAN5000 »

This tool ma ylet you screen for them.
https://members.widemoatresearch.com/screener/
These are 50 years and 3.5B or less
FMCB
UVV
NWN
CSVI
SJW
TR
SCL
CWT
ABM
AWR
FUL
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Re: Dividend hikes, aristocrats and methodology

Post by Peculiar_Investor »

The search function also turned up these older FWF topics that might be of interest to some:
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