Saturday, October 10, 2015

Analyzing CCC List - Dividend Growth vs Market Capitalization



I regularly use David Fish’s CCC list to review and test my assumptions on DGI investing. 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.


For this article, I am looking at the relationship between the dividend growth and the market capitalization. My original strategy focuses on larger companies with high market capitalization due to its reduced market volatility - but at the expense of a lower dividend growth.

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


After extracting the dividend growth and years of growth , I can scatter plot all the companies (735) for dividend growth and the market capitalization and then apply a trend line.



It is clear that there is no relationship between market capitalization and dividend growth. Based on the data, the growth is steady close to 11%.


What about volatility? I can use beta as an approximation of volatility. After extracting the beta and years of growth , I can scatter plot all the companies (735) for beta and the market capitalization and then apply a trend line.


There is a very slight degradation - but not much! A larger market cap does not significantly impact the beta.


With this data, it is clear my strategy needs to be changed to include companies at different capitalization. I will update my diversification strategy.


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


You should visit his blog and read his articles if you want to learn DGI investing.


Do you use the CCC list? What other interesting characteristics did you observe with DGI stocks?
D4s

3 comments:

  1. I like the way you think. Of course, I now have to go make scatter plot charts on different theories.

    My recent observation is that people are willing to pay far more in terms of earnings and expected earnings growth on younger dividend growing companies than they were 10 years ago.

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    Replies
    1. Chimp,
      I would be happy to check out your plots and your theories! The more the merrier!
      I agree with you that growing earnings and expected earnings growth are key in the selection process. Its like gas for the dividend growth engine. No gas --> No div growth.
      d4s

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  2. I didn't get to the scatter charts yet, but thinking about the dividend growth vs. dividend track record has been on my mind a lot so I'm comparing companies in the same sector and industry and looking for rapid growth vs. slow to little growth but long histories of increases. No gas - no growth as you said. Compared CVS to WBA and I prefer CVS due to growth. Still like the charts, keep them coming.

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