Investment Scenario Planning

The universe of divdend increasing stocks took a cut in Q1 of 2008 which, can impact how dividend investors manage their portfolios. If you are an investor who looks to build up a stable contingent of 20 – 30 companies that consistently increase their dividends then the universe of stocks got smaller. In an article published by IndexUniverse, the data from the folks at Standard and Poor’s is very telling. Have a look at the chart below:

Dividend ActionsClick to Enlarge

As you can see, compared to 2007 the positive dividend actions (number of companies that increased their dividends) dropped from 740 to 598. This is a 15% drop which in my eyes is very significant. Although the year is nowhere near over the decline does break the trend we were seeing of increasing dividend payments through the 2000’s. Does this mean the end of dividend investing and we should abandon all hope. I don’t think so.

During time like these it is prudent to consider a much longer term view and focus on what history has taught us about dividends. As my ‘Divdend Key’ series shows, dividends have had a huge impact on equity performance. Keep this chart in the back of your mind during the tough times:

Investment ReturnsClick to Enlarge

My approach with data like the number of dividend increases and decreases is to largely ignore it. Over time it becomes inconseqential if you are focused on the right asset allocation and on chosing equities that continue to increase dividends through the rough times. If anything it weeds out the bad investments. In the end the companies that can continue to raise dividends in markets and economies like the ones we are in now will be stocks that I want to own for the real long-term.

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April 16, 2008, 8:26 am

Like Warren Buffett says “be greedy when other are fearful, and fearful when others are greedy “. I had GE on my watch list and with the news last week and 14% drop in the share. I hit the buy button.

April 18, 2008, 7:20 am

[…]The Dividend Guy presented Dividend Increases are Down and Dividend Cuts Are Up at his blog. Compared to 2007 the positive dividend actions dropped from 740 to 598[…]

April 26, 2008, 10:09 am

[…] The Dividend Guy writes that dividend increases are down and dividend cuts are up. […]

November 27, 2011, 2:37 pm

[…] The Dividend Guy presented Dividend Increases are Down and Dividend Cuts Are Up […]

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