Dividend Quality and Consistency

General
1

Hi,
I have a question about the quality and consistency of dividend payments of a company. How can we research the company to continue and increase dividend payments? what factors do you consider?

I also saw that there is a formula for the 5-year average Dividend growth not a shorter period of time. Is anyone aware of how to use this formula for a custom period of time such as 3 years, 10 years, etc.?

Regards

2

I’ve not yet seen any value in analyzing trailing dividend growth. I would look at other things such as interest coverage, debt, liquid assets and so forth. But in the end, if you are looking long-term at dividend quality and consistency you are probably looking at large blue chips for some ability to weather a storm. This is well picked over. Long-term dividend growth might be more closely tied to revenue growth or something but I haven’t really dug deep into it.

3

According to Investopedia.com:
4 Ratios to Evaluate Dividend Stocks

The four most popular ratios are the dividend payout ratio; dividend coverage ratio; free cash flow to equity; and Net Debt to EBITDA.

I added Dividend coverage ratio based on the trailing 12 months to the public formulas:

$DividendCoverageRatio

I am not sure if it’s correct. :thinking:

4

I see your formula is DivPS(0,TTM)/ EPSExclXorA (0,TTM)
The article in your link says the formula is EPS/Div like EPSExclXorTTM / DivPSTTM. When ranking, you would use ‘higher is better’.

EPS can be negative or positive while dividends are always >= 0. For ratios, it usually works better if the variable that can be either negative or positive is used as the numerator. The reasoning is that if you do Div/EPS then it would be set to ‘lower is better’. But then if EPS is a negative value, it would get a good rank which is not what you want.