Sunday, April 22, 2012

Dividend Growth Rates: Using The Past To Estimate The Future

A new article of mine has been published on the investing website Seeking Alpha. The article is entitled Dividend Growth Rates: Using The Past To Estimate The Future and presents a quantitative analysis of the relationship between past and future dividend growth rates.

Note that my articles appear under the username "Dividend Growth Machine."


  1. Hey I read your article. You have some great ideas springing up in your head. Thanks for the research!

    I quote you, "companies with relatively high past DGRs were generally unable to maintain such high DGRs in the future." I'm weary of analysis when high DGR is projected far into the future. Being able to maintain growth rates greater than say 15% better be supported with high EPS growth coupled with a low payout ratio. In general I would be happy with 7% dividend growth, I think it's more sustainable and realistic. It depends on the company of course.

    I see you are gaining quite the following at Seeking Alpha. That site has provided me countless investing ideas. I really ought to start an account over there.

    Looking forward to your next article,


    1. Hi Compounding Income,

      Thanks for the feedback. I agree that it is difficult for a company to maintain a double-digit DGR without corresponding earnings growth (or a change in the payout ratio). That's one reason why I look for companies that appear to have good long-term prospects that would support continued earnings growth and, by extension, dividend growth.

      Like you, I would be satisfied with a DGR of 7% from most companies. In building my portfolio, I have been aiming for an average DGR (across all my stocks) of at least 7.2%, which is the rate at which dividends would double in 10 years ("Rule of 72"). I think it's a fairly realistic goal.

      I have been pleasantly surprised by the strong positive reaction to my articles at Seeking Alpha. It has definitely encouraged me to write more.