Looking At Dividend Growth Through A Different Lens

Includes: PFM, SPY
by: Brad Kenagy

Usually when discussing dividends, the conversation can lead to whether dividends are a better way to return capital than buying back stock or vice versa. I wrote an article on this topic last year and found a combination of dividends and buybacks works best. In this article, I will be looking at dividend growth through a different lens, the way I will be looking at dividend growth by market capitalization.

My Process

  • Step 1: Find Stocks With Growing Dividends

The first step I had was to find a list of stocks that are growing their dividends. So I used the holdings of the PowerShares Dividend Achievers Portfolio ETF (NASDAQ:PFM) as my base list of stocks, and PFM has 210 holdings.

  • Step 2: Screen Stocks by Market Capitalization

The second step was I copied and pasted the list of holdings in to the FinViz.com Screener. Then I selected the market cap criteria of large cap, and copied and pasted those stocks and the one-year returns into a spreadsheet. I repeated this process for mid-cap stocks, small-cap stocks, and micro-cap stocks.

  • Step 3: Analyze Results of Screen

The data in the table below shows the number of companies for each market-cap segment, as well as the average return for each segment as well as the SPDR S&P 500 Trust ETF (NYSEARCA:SPY) and PFM for comparison. The data shows mega-cap, large cap, and mid-cap companies that have had increasing dividends outperformed both PFM and the SPY, with large-cap stocks outperforming the most. Small-cap stocks outperformed the SPY but failed to outperform PFM, while micro-cap stocks underperformed both the SPY and PFM.

# Companies

Average Return




Large Cap












Total Companies







Based on the data I used it shows that large-cap and mega-cap companies that have a history of growing their dividend provide the best average returns out of all the market cap segments. The data shows that mid-cap stocks that grow their dividend also provided higher average returns than smaller companies, as well as the SPY and PFM.

I can see from the data that for small-cap and micro-cap companies paying a growing dividend may not be enough to outperform the SPY, or larger market-cap segments of dividend growth stocks. So, based on my observations of the information when you are screening for dividend growth companies, for the best returns on average it's better to buy stocks that are mega-cap or large cap.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Disclaimer: See here for full disclaimer.