Sunday, September 20, 2015

Analyzing CCC List - Dividend Growth vs Years of Dividend Growth



David Fish’s CCC list is a wonderful resource. You can access it here: http://www.dripinvesting.org/Tools/U.S.DividendChampions.xls


As a quick summary, the CCC lists the Dividend Champions, Contenders and Challengers. It is  updated monthly with the name of every U.S.-listed stock that has raised its dividend each year for at least the past five years in a row, or in the case of the Champions, 25 years in a row.


There’s a wealth of information hidden in the data. For this article, I am looking at the relationship between the dividend growth and the years of dividend growth

One observation I see when I analyze Dividend Growth Stocks is that the dividend growth rate is inversely proportional to the years of dividend growth. Logically, this makes sense to me. An established company needs to grow its earnings to pay its dividend. The longer it can grow its earning, the longer it can grow its dividend. However, this can get difficult over time, so you expect the growth to go down.


By analyzing the data on the CCC list, we can investigate this relationship further.


After extracting the dividend growth and years of growth , I scatter plot all the companies (735) and then apply a trend line.
As you can see, there is a downward trend.


  • From 5 to 20 years, the growth rate is around 12-10%.
  • From 20 to 35 years, the growth rate drops down to 10%-8%.
  • From 35 to 50 years, the growth rate drops down to 8%-6%.


Based on this information, I will consider the ranges as part of my future DGI analyses.

Of course, the results shown are “averaged” out statistically. There will be cases outside the norm.


Do you use the CCC list? What other interesting characteristics did you observe with DGI stocks?

D4s

4 comments:

  1. when a stock no longer growth at a fast pace, they start to distribute dividend such as Microsoft and apple. Eventually, the dividend will outpace their growth. That's why to a good dividend portfolio needs to contains growth stock, dividend champions, and dividend growth stocks into the mix. Otherwise you'll see your portfolio's growth is stagnant, and still get eat up by inflation.

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    1. Vivianne, thanks for visiting! I completely agree with you to diversify your portfolio with a mixture of high/low yields and low/high growth dividend stocks. My initial strategy was to look at dividend stocks > 20 yrs growth - but now I am okay with >5 yrs with my average around 10 yrs.
      d4s

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  2. I am a big fan of the list produced by David Fish.

    Thanks for confirming my belief that growth does not go in perpetuity - it declines over time.

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    1. DGI, thanks for your comments.
      I don't know how David Fish maintains his CCC list so consistently over the many years. It is such an invaluable resource for dividend investors.
      D4s

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