Stocks that Raise their Dividends

What I want to talk about today is stocks that raise their dividends yearly or on a regular basis. I follow some dividend lists that show stock that have raised their dividends yearly for a number of years. Both the qualifications for these lists and the stocks on these lists are always changing.

However, just because these lists are changing, it does not mean that they are not useful. They are an excellent place to start to look for dividend paying stock that increase their dividends on a regular basis. The dividend lists that I follow of Dividend Achievers (see resources) and Dividend Aristocrats (see indices).

As with using other filters to find good stocks, you have to be very careful about stocks on such lists. Most stocks are fine, but there are always ones that are not. There are also fine stocks excluded from these lists. I think that Indxis had recognized some problems with their lists because now they not only have a Canadian Dividend Achievers list for Canada, but a Select Canadian Dividend Index list.

However, they do not do this for US, UK or International stocks. The lists for other areas only have achievers lists. The new Canadian Dividend Index has more stocks as they are including banks and other financial institutions. They include all large companies that have increased or maintained their dividends for the last 5 years.

The other interesting thing about the Indxis lists is that for US stocks, they must have increased their dividends year for 10 years. Other areas, including UK, Canada and International stocks must only have increased their dividends for 5 years.

One stock that I feel is problem stock that is on these dividend achievers lists is AGF Management. I do not think that this company has recovered from the 2000/1 bear market. The result of their continuation of increasing dividends is higher Dividend Payout Ratios. (See my site for information on Dividend Payout Ratios). Their 5 year median DPR on earnings coming into 2001 is 16.82% and for cash flow was 7.15%.

The 5 year median DPR coming into 2010 on earnings was 67.38% and on cash flow was 27.71%. The DPR for the financial year ending November 2010 on earnings was 79.23% and on cash flow was 51.14. The DPR for the financial year ending November 2011 on earnings was 91.74% and on cash flow was 47.04%. I will shortly being reviewing this stock as it is one I follow. I held this stock from 2001 and sold some in 2006 and the rest in 2008 and made a total return of 2.09% per year.

I really bought this stock at the wrong time. The median 5 year dividend yield was 4.83%. I sold because I thought that this stock was going nowhere and I did not see that it was going to recover fully anytime soon.

Just because a stock is not on such a list also does not make it a bad dividend payer and also if a stock is removed, it does not make it a bad dividend payer. I held onto all my bank and other financial stocks after they were removed from the dividend achievers lists because I believed that in the long run, they will serve me well. They are now recovering and starting to increase their dividends.

Personally, I rather have a stock stop dividend raises or even cut the dividend if it is the best for the long term viability of a stock. For example, I bought TransCanada Corp after they decreased their dividends in 2000. I had had my eye on this stock for some time, but thought it was overpriced. It did get into difficulty but it had a plan. It took a few years to recover to the old dividend rate, but it did.

I have written about dividend stock before. See my site for my blog entry about buying Dividend Growth Stocks. Also see my site for my blog entry on buying Dividend Paying Stocks.

I am going to pause on Thursday because I am going to the Money Show. I will be reporting what I hear there, the same as I did last year.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.