Half Year Dividend Increases (2018)

Last quarter, I initiated a series on dividend increases experienced within my portfolio.  The data used was based on actual announcements and identified increases that were “Outsized” as well as those that were merely “Tiny”.

In Lanny’s recent piece, The Impact of Dividend Increases through June of 2018, though thoughtful and in a similar vein, was troubling to me in a subtextual way.  Not that the data presented was inaccurate per se, only that the derived message was a little (likely unintentional) deceiving to the majority of his followers.  The two deficiencies I found in his data were:

  1. Visa reported a dividend increase of 7.69% while he reports 7.73%.  This is likely caused by rounding as his data source (dividend increase from the monthly posts) is based on whole dollars.  A dividend change from $.195 to $.21 will likely result in broker rounding distorting derived percentages.  Not major as he probably saw a 7.73% personal increase.
  2. His approach on annualization is wrong.  The statement, “Of course, one can annualize the percentage and equate to 6.78%.” which is a doubling of the six month number, ignores conventions established by the Global Investment Performance Standards (GIPS) which include, “any investment that does not have a track record of at least 365 days cannot “ratchet up” its performance to be annualized.”  The basic flaw in his approach lies in the fact that his data is not normalized to reflect varying declaration (effective) dates throughout the date range used thereby distorting any derived “annualization” process.

Like some of the commenters, I too began the process of calculating my personal results in this manner until my eureka moment arrived.  There is minimal correlation between actual results and the Dividend Growth Rate. The greater correlation resides in the allocation (quantity) within the portfolio.  Yes the power of DGR is real but is not static. It will fluctuate over time across companies, industries and investment allocations. Nor is it predictable. At which point I ceased this replication exercise.

On a similar note, Buy Hold Long issued a challenge to increase total forward dividend income by 4.24% during the month of July.  A noble challenge indeed. However, the unintended consequences are potential reinforcement of bad habits.  For example, how many investors will be researching high yield or investments inappropriate to the degree of personal safety required?  Or putting their strategy aside to engage in this quest? On the other hand, I’m with Mr SLM’s comment when he says, “I think I’m on the part of the curve where increases aren’t linear from contributions”.

I guess my root issue with my disdain with these endeavors is the fact that we know not our audience.  One could assume a baseline knowledge level – but this would be strictly an assumption. This brings to mind another study of mine from a couple of years ago.  At that time I was unable to prove any confirmation bias but still have been unable to shake the sense that there is some within the community – especially with newcomers.  Also, we can’t discount the number of mirror, copycat or coattail strategies that are prolific today. Which is the probable reason I shy from these types of analyses/events.  I like to think that my results can be replicated (if desired) whether a portfolio is robust or just beginning which highlights why I report percentages.

As usual, I digress.  The purpose today is to share the first half increases – by percentage – reported by my dividend payers.  One item to note is the increases enjoyed by financials (banks, in particular) will be tough to replicate going into 2019.

And this, my friends, is the message this week with the upcoming earnings season sure to present some interesting commentary 🙂

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5 thoughts on “Half Year Dividend Increases (2018)

  1. Interesting points SR. I too read Lanny’s article and then annualized my first half dividend growth rate. After I had done so, I realized an error in the logic at least for my portfolio. Two thirds of my holdings have announced their dividend increases in the first half of the year. So if I annualize the first half, I come up with an 8%+ growth rate. But if I look at my personal projection for 2018 dividend growth based on first half actual and last half projection, it will likely be closer to 6+% since 2/3 of my holdings have already announced. Fun with numbers. I will still take that growth rate and believe it will be better than most of my past years. Tom

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    • I do attempt to hit the oddities – though missing at times 🙂 I’m still noodling over the comment at Frankie’s. I think I failed to reconvert the data into an Aussie view leaving it in US mode. Anyway, I’m a little surprised at your 6% – I assumed yours would be closer to 10%. Mine is tracking at 12.3% and should get a little boost from the banks now that CCAR is done (~ 1%? being so late in the year). I’ll get some stock dividends later in the year but those will front-load 2019 results.

      Thanks for the read!

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  2. Always appreciate the differing views of everyone in the community. That’s what makes this community so great, we all have a similar ‘goal’ but getting there is a different journey each time. But we also have to be held accountable for what we say. Thanks for the mention, my intention was not to go for straight yield but to help inspire someone/anyone to invest just that little bit more to help forward dividends.
    Regardless, I appreciate the commentary and look forward to your next post.

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    • Sorry about being a little rough on my ‘soapbox’. I did understand your underlying desire to provide motivation to your readers which is something we all require at times. As a personal example, dividend increases alone might raise my forward dividends by about 30% of your challenge target requiring new investment to meet it. Being in the distribution phase makes me an unlikely candidate to meet this threshold, whereas it may be beneficial for younger investors.

      Hope all is well with your grandad and good luck on the wedding!

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      • I’m always open to productive and positive criticism. I’m not going to be some snob who thinks he’s always right.

        I do agree that my challenge doesn’t fit everyone’s style or stage of investing. Regardless a little motivation is always nice 🙂

        Thanks for your comments, my grandpa is recovering well even though the docs won’t give him more medication to ease the pain…

        Cheers 🙂

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