Discriminating dividend investors always perform a background check before letting a stock into their portfolios.
What they look for is a record of consistent dividend growth. Rising dividends over the years offset inflation, and they often feed long-term share price growth. But while many companies pay dividends, only a small minority have a corporate culture that emphasizes dividend growth and a history of continually paying more to shareholders year after year. To find these companies, check out these eight online research tools for dividend growth investors:
1) Corporate dividend histories
You may have read somewhere that a company has a good record of dividend growth. See for yourself by checking a firm's dividend history online. Go to the investor relations area of a company's website, or just Google the company name plus the phrase "dividend history."
One thing to look for is a sign of how seriously a company takes dividend growth. Enbridge Inc.'s website mentions that the company has paid dividends for more than 62 years, that the dividend has been raised annually since 1996 and that the average annual growth rate over the past 10 years is 14 per cent.
Another detail to check is the consistency of a company's dividend increases. Annualized numbers over five or 10 years can hide a rise or decline in a company's dividend growth momentum.
The problem with online corporate dividend histories is that they sometimes have selective start dates that leave out dividend cuts. Be curious if you don't see how dividends held up in the 2008-09 financial crisis.
2) Annual reports
Online dividend histories are backward looking. If you want a sense of what a company's dividend intentions are for the future, try the latest annual report. Metro Inc., which has increased dividends for 20 straight years, says in its 2014 annual report that now aims to pay out 25 per cent of net earnings as dividends, up from a target of 20 per cent previously.
Companies that offer little or no information about dividends online may be more talkative in their annual reports. One such company is Saputo Inc., which turns out to be a strong dividend growth story despite barely mentioning dividends on its website's shareholder information page. In its latest annual report, the company said it has increased its dividends per share annually while posting growth rates of 9.5 per cent in fiscal 2014 and 10.4 per cent annually since 2009.
You can use past annual reports to find out how a company's dividends fared in 2008-09. On the Sedar.com website, you can download these reports going back to 1997. Here's a hint on how to head directly to dividend-related information: Type control-F to open a search box, add the word "dividend" and then hit enter.
3) Globeinvestor.com
Use our Watchlist feature to track dividend stocks you're following. If you select "dividends" from the pull-down menu labelled "view," you'll find dividend growth rates and total returns (share price change plus dividends) for the past one- and five-year periods, as well as dividend payout ratios (cash flow per share divided by dividend per share over the past 12 months).
Also check out Globe Investor's Dividend Investing page, where you'll find dozens of articles on dividend investing by Globe and Mail dividend expert John Heinzl (tgam.ca/yield-hog).
Quarter-by-quarter dividend histories for Canadian and U.S. stocks, with percentage increases (and decreases) shown each time a company adjusts its payout to shareholders. If you're looking for dividend stocks to research, the Dividend History home page has a list of recent dividend increases and cuts by North American companies. There's also a list of the most searched stocks.
5) DividendInvestor.com
Pick a U.S. stock and this website will provide a Dividend AllStar Ranking that assigns stars according to how many years of dividend growth a company has. Five-star firms have 20 years of dividend increases, four stars means 10 years of increases and three stars means a five-year history of increases. Data on Canadian stocks is available at ca.dividendinvestor.com.
This is the website for The Connolly Report, an old-fashioned ink-and-paper newsletter that has offered steady, sensible insight since 1981. The website, alas, is not as good. It's a jumble of links to articles on dividend investing, some of them pretty dated. But there's just enough useful material here to make a visit worthwhile, including a highlight from the March edition of The Connolly Report on how dividend growth feeds share price growth.
Lots of dividend growth commentary mixed in with analysis about income investing in general. Mostly U.S. stocks, but there is Canadian content. For example, a recent article compared Suncor and Imperial Oil from the point of view of the long-term dividend growth investor.
8) Motley Fool Canada (fool.ca)
If you type "dividends" into the homepage search engine, you'll get a mix of articles on high-yield dividend stocks and dividend growth. A recent article looked at five TSX-listed stocks poised to increase their dividends.
9) Dividend Growth Blogs
There are many blogs that cover dividend investing in general, some of them focusing on achieving financial freedom by generating an income from dividends. These blogs are primarily about dividend growth, and they have at least some Canadian content:
- Dividend Growth Investing & Retirement : Look for the Canadian Dividend All-Star List, a massively detailed spreadsheet that is updated on a monthly basis and includes long-term dividend growth data.
- Dividend Growth Investor: A nice mix of analysis on individual dividend growth stocks and smart commentary on dividend growth investing.
- The Dividend Guy : Some content is reserved for subscribers, but there’s solid investing content here as well. A recent post made this very good point: Don’t fall for high yield stocks – go for strong dividend growth.
