Companies with persistent and consistent dividend payment streams are a small portion of the overall stock universe available in U.S. markets. Let's see just how large or small that group really is.
First, how many companies have paid dividends year after year without interruption (not without reductions, but always at least something)?
There is one company that has paid dividends each year for at least 200 years: The Bank of New York (BK).
There are eight companies that have paid dividends each year for at least 150 years (six banks and two utilities). They are Bank of New York, JP Morgan (JPM), Toronto Dominion (TD), Westpac Banking (WBK), Bank of Nova Scotia (BNS), Bank of Montreal (BMO), WGL HOldings (WGL), and York Water (YORW). Three are Canadian, one is Australian, and four are of the United States.
For other time periods, here is the number of companies that have paid each year, identified out of the 3,224 companies in the Standard and Poor's database that currently pay dividends. That database contains 7,998 companies with a quoted price:
- At least 100 years: 68
- At least 50 years: 349
- At least 25 years: 594
- At least 10 years: 1591
- At least 7 years: 1959
- At least 5 years: 2465
- At least 3 years: 2897
Roughly one in five companies pays dividends at some level and has done so for at least 10 years, and about one in four have paid some amount of dividends each year for seven years.
Better than paying something every year is paying more every year. That is the nature of the S&P 500 Dividend Aristocrats (SDY). It contains up to 50 selected stocks in the S&P 500 that have paid dividends each year for 25 years and increased the dividend in each of those years.
Looking farther afield than just the S&P 500 and shortening the mandatory dividend payment period to seven years, we find 548 companies that (1) have paid dividends every year, (2) have not decreased dividends (maybe not increased them, but not having decreased them during the seven years), and (3) paid at least as much in the most recent quarter as they did in the same quarter of the prior fiscal year. That is about one company in 15.
Liquidity is also an important issue to be able to enter or exit a position without putting too much of a splash or ripple in the pond, and expecting to find minimal Bid/Ask spreads. Let's break down that group of 548 companies by their three-month average per minute dollar trading volume:
- Any $ volume: 548
- >= $10,000/min: 349
- >= $25,000/min: 293
- >= $50,000/min: 244
- >= $100,000/min: 191
We'd be extremely hesitant to be in any stock with less than $10,000 per minute in average dollar trading volume, and really feel $25,000 is a more reasonable bare minimum. Depending on how quickly and cleanly you wish to enter and exit, and how large your position size will be, you may want a higher per minute trading volume of $50,000 or $100,000.
So, if your liquidity requirements lead you to want $100,000 per minute trading volume ($39 million per day), then only about one in 40 stocks would be in your research universe.
Yield will fluctuate daily as prices change, but the record of dividend payments is slower to change -- at the fastest it will generally change quarterly, and the turnover in the names within the group of consistent payors is likely to be low.
There are certainly many other fundamental, technical and thematic issues to consider when evaluating stocks, but for dividend investors, the group defined here is probably a good hunting ground.
As a courtesy to our readers, we make a spreadsheet of the names, symbols, industrial classification and domicile country of the 293 consistent dividend paying companies in the $25,000+ per minute dollar trading range available here for download.
This list does not discriminate between those with low dividend and high dividends, nor does it speak to the financial health of the company, the direction of the price movement, or the thematic suitability for the future. However, if you can find the gems you seek within this group, you might be well served by their consistent payment of a share of profits to its owners, and for doing so in a stable manner.
Securities Symbols Mentioned In This Article:
BK, JPM, TD, WBK, BNS, BMO, WGL, YORW, SDY
As of December 21, 2010 we hold positions in some but not all managed accounts for the following securities mentioned in this article: SDY.
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Additional disclosure: As of December 21, 2010 we hold positions in some but not all managed accounts for the following securities mentioned in this article: SDY.