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Dividend track record: counting the years of increases

How to count consecutive years of dividend increases, where to find the history in annual reports, usual thresholds, dividend indices and the traps of a long streak.

Published

Definition

A dividend track record is often summed up by the number of consecutive years in which the dividend per share has increased. A long streak shows that management makes the dividend a priority, and that the company has managed to raise it even in difficult years. It is a sign of consistency, not a promise for the following year.

Formula

Consecutive years of increases = number of financial years in a row in which the dividend per share exceeds that of the previous year, counting back from the latest

Where to find it in an annual report

The dividend per share for each financial year appears in the management report (appropriation of earnings) and in the part of the annual report about the share, which often gives a five-year history. The company’s investor relations page usually publishes the full history. Data sites such as Moning show it too.

Common thresholds

Growing dividend: 10 years or more for green, 5 to 9 years for orange, red below 5 years. Some US dividend indices require 25 years of increases. In Europe, where dividends more often follow earnings, streaks of more than 20 years are rare.

In the preset strategies

Preset strategy Criterion met To monitor Criterion not met
Growing dividend Consecutive years of dividend increases ≥ 10 years 5 years to 10 years < 5 years

Pitfalls

  • A dividend kept flat without an increase breaks the streak in most definitions: check the one used by your source.
  • Stock splits and bonus shares change the dividend per share: compare adjusted amounts.
  • A long streak can be extended by token increases of a few cents while the financial position deteriorates.
  • A dividend paid in shares, or with a scrip option, counts as a dividend, but it dilutes shareholders who do not choose cash.

Where it does not apply

  • Young or fast-growing companies, which reinvest their earnings and do not pay a dividend yet.
  • Companies whose policy ties the dividend to earnings (a fixed percentage of profit): the streak breaks with every fall in earnings without the policy changing.

A worked example

A fictitious company, called Company N here, paid these dividends per share over the last six financial years: €1.10, €1.15, €1.15, €1.20, €1.26, €1.32. Counting back from the latest, the dividend increased three years in a row (€1.20, €1.26, then €1.32). The year at €1.15, the same as the year before, breaks the streak. The criterion is worth 3 years: red for the Growing dividend preset strategy.

What to read it with

A long streak matters most if the dividend stays covered by earnings and by cash flow. Read it together with the payout ratio and the FCF payout ratio.

Sources