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SDS (Seductive Dividend Stocks)
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Sorry I hide my true identity but I'm a physicist/engineer, native contrarian and idea generator. I am an eclectic dividend investor with motto "In God We Trust, All Others Pay Cash" applied to companies I invest in. I like to read /and read a lot - did you look on my SA photo 8-)? / including... More
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  • On Dividend Research From Ned Davis Research  0 comments
    Aug 12, 2014 11:34 AM

    Many dividend growth investing (NYSE:DGI) proponents (including myself) use famous Ned Davis Research graph (fig.1) to argue that dividend investing is outperforming approach. Usually this graph came from a third party and unfortunately the original source is not available for small dividend growth investors (DGis). But this graph might be not so impressive for DGis as it appears on the first glance. Do you not that the top orange line is for dividend growers AND initiators? If yes - how many dividend initiators are in your portfolio. It is Zero in my…..

    Fig 1.

    At least couple questions should be answered for better understanding of the graph:

    a) What is the definition for dividend growers in Ned Davis Research report? Are these companies from David Fish's or similar list with long history of dividend growth or just companies which increase dividends in year N to compare with year N-1?.

    b) What is the definition for dividend initiators in Ned Davis Research report? Will be ABC company qualify as the dividend initiator in 2013 if last dividend they paid 1973 or in 1990 or in 2011 but not paid dividend in 2012, 1991-2012, 1974-2012?

    Any DGi knows how to find a dividend grower - just look dividend history (or David Fish CCC list), check recent years earnings (better if they are positive in last 3-5 years), check payout ratio (better if it is below e.g. 50% in last 3-5 years), check company announcement (verify that they are not going to cut dividends soon for other usage of capita) and you might be 99% sure that this firm will pay dividends next year.

    I have no clue how to find a dividend initiator. Should I just read company announcements? How can I be sure that the initiation of dividend will lead to long dividend history (well some companies promise to pay dividend next 3-5 years but I do not recall anything beyond such relatively short period /I guess CEO and BOD cannot foresee/).

    I think we should address questions a) and b) to Ned Davis Research (ndr.com). Hopefully they will answer if couple dozens people ask them….

    12 Aug 2014

    Added 11/27/2014

    Ned Davis Research have analyzed data for Europe ex-UK and also found that dividend stocks outperform non-dividend (fig. 2 below).

    (click to enlarge)

    Fig. 2

    I still have no clue about their methodology.....

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