Wednesday, November 05, 2014

Dividend Surprise Tracker: 11/5/2014

A few weeks ago, we announced a new tool we have here at DCM that allows us to track up-to-the-second dividend announcements, dividend growth, and actual dividend relative to Wall Street and Bloomberg projections.

In our view, dividends tell us how optimistic corporate America is about future earnings and cash flows.  If companies are pessimistic about either domestic or international economic growth, it is likely they will hold back on paying out cash to shareholders - choosing to hold that back in the company reserves in anticipation of future headwinds.

Dividend Surprise Tracker Update

Below are the dividend declarations over the past 3 months as of November 5th:

Out of the 59 companies expected to raise their dividends, 59 did so. And most importantly, the median dividend increase for companies was 12.5%.  Despite the headwinds in Europe and internationally, U.S. corporations continue to be very confident in the future.

Company Highlight: ABC

One of those companies is AmerisourceBergen Corp. (ABC), which we own in one of our portfolios.  On November 3rd, ABC announced their 3Q earnings results, which beat analyst expectations by 4.6%.  We were more impressed by the announcement that they were raising their dividend by 23.4%.  Even more impressive was that the dividend hike was over 11% more than Wall Street was projecting.  This signals to us that AmerisourceBergen may be more optimistic about their future than Wall Street is anticipating.

The chart above shows ABC's dividend vs. price over the past 7 years.  As you can see, their price has grown dramatically right along with the aggressive dividend raises.  In our view, as long as ABC continues to grow their dividend payments to shareholders - we don't expect price to fall far behind.