Friday, January 14, 2005
The figures for dividend growth of the major indices for the calendar year are now finalized and the data is very interesting. Dividend growth for the average stock in the S&P 500 in the past year was 10.02%. That was a big improvement over the 5-year and 10-year averages of 5.9% and 7.2%, but we still cannot claim, from a cash flow perspective, that investors are getting their money's worth, because during this same time, earnings grew by 24%, 7.3%, and 10.3%. Dividend investors fared better in the Dow Jones 30 stocks, where 1,5, and 10-year dividend growth was 14.7%, 11.9%, and 11.1%, respectively. There have been some big headlines about dividend increases and special payouts, such as Microsoft's $3.00 per share payment, but the Rising Dividend Investor believes dividends are still being ignored by the majority of companies. We are asked all the time what we think about the fact that dividends are really catching on? We respond by saying that dividends are getting more news, but we are not convinced that dividends are becoming a way of life at many companies. We believe, in many cases, dividends are still just a way for companies to throw us a bone, when what we really want and deserve is for them to tie their dividend to their expected trend of free cash flow growth. Companies have strategic plans and sales and earnings projections; we want more companies to make a public dividend projection. Then, we've got something to work with. At present we can count only a handful of companies that have made such a bold pronouncement. We will be talking about them in the weeks ahead.