Can You Predict Dividend Payments into the Future?
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I believe you can take a stab at it, but it is not something you should do to make your investment decision on. If you do it, it should only be for interest sake and because you are the kind of person who likes to mess around with analyzing your investment holdings (like me!).
That being said, one thing about companies that consistently raise their dividends is that it becomes relatively easy to make a prediction of the future dividend payments an investor can hope for in the future. Notice that I bolded hope in that last sentence. The reason is that projecting future dividend payments is nothing more than a guess and should not be used to make a stock purchase decision, other than to verify the historical dividend increases a company has made. It would be foolish for an investor to bank on receiving $X in dividend payments from a company in 2025 for example. We really have no way of ensuring this will happen.
However, I do find the process of projecting dividend payments from a company more fun than anything. It is interesting to think about the what if’s for a particular stock. If a company has a long history of huge dividend increases and those dividend increases continued, then the actual dividends from that stock could be huge. When comparing stocks, it is also interesting to see the impacts of the historical growth rates on the different stocks. Again, this is not to make any sort of stock selection decision. Please do keep that in mind as I present a couple of the charts I created.
I ran the numbers on General Electric before the most recent dividend increase, which has already surpassed my projections. Given the strong history of dividend increases for GE, my Apple Numbers chart is projecting that in 2017 GE could be throwing off $1.78 in dividends.
Click to EnlargeAnother stock I had a look at was Bank of America. Regardless of the recent banking troubles and the fact that my chart is already out of date because of recent dividend increases, and assuming that dividend increases continue on the same trend as in the past, by 2017 investors could be receiving $3.71 per share in dividends
Click to EnlargeAgain, this exercise is not meant to be a recommendation for purchasing these stocks. I would never buy on this data alone as it is purely a guess. In my opinion it not enough to buy a stock based on future dividend payments alone. Historical dividend growth can be factored into overall stock analysis, but it should not be used in isolation.
Disclaimer – The Dividend Guy owns shares in GE and Bank of America
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moneygardener said:
Interesting…but like you say impossible to predict. I like the idea though as firms like GE,JNJ,PG,PEP, etc. are easier to predict and you can almost predict where the share price will be as well in 2017 given the dividend rate.
May 28th, 2008 at 10:38 am -
Dividends4Life said:
You can’t ever predict perfectly, but that is what makes the process interesting!
Best Wishes,
D4LMay 29th, 2008 at 10:58 am
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