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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-)? /... More
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  • Dividends Heritage Project Report: Part. 1 3 comments
    Jun 29, 2012 10:31 AM

    I'm a dividend investor and in order to obtain better results I try to know about stock investment as much as possible. From more that 100 books and 200+ scholar papers I read I figured out that dividends were studied much less than stock prices. Mostly books and papers describe advantages of high yield investing and very few put attention to dividend growth (DG) investing [1]. Almost all dividend growth investing publication ignore survival bias which is plainly incorrect. As Spanish/US philosopher George Santayana wrote "Those who cannot remember the past are condemned to repeat it".

    Therefore I decided to conduct Dividends Heritage Project in order to have non-biased data. In this report I describe goals of project, information I already collected and processed as on June 20, 2012, future steps and help I hope to get from SA community.

    Although "past performance is no guarantee of future performance" the history of dividends IMO teaches us a lot of useful for DG investing aspects.

    A) Dividends Heritage Project Goals

    1. David Fish's CCCD list is one of main source of information for DG investors. David Fish started this list in 2007. Similar but less precise lists have Standard & Poor and Mergent but they are also relatively new while some companies practiced DG more than century ago. Hence first goal is to collect accurate historical information about dividends.

    Because DG is more common for US companies and uncertainty with currency rates I decided to limit initial dividend database to US companies.

    2. Obtain descriptive DG statistics for example

    a) to see how long was dividend increase strike for each company,

    b) to recognize if it was dividend cut for each company and cut %,

    c) to recognize if it was dividend freeze for each company,

    d) to get statistics for DGR, DCR, dividend growth life-time, etc..

    3. Figure out that conditions forced companies that had DG to cut dividends and build dividend cut prediction model/. I have access and can use professional SAS institute software that is excellent for statistical analyses.

    B) Dividends Heritage Project Status (June 20, 2012)

    The best sources of information for this study are COMPUSTATand/or CRSP but, unfortunately, I don't have access to this databases. So I tried to replace it with sources I can access namely Mergent, ValueLine and Standard & Poor's NetAdvantage to collect information about US companies that at least once paid dividends from 1956 till 2011.

    I combined information from abovementioned sources and got a list of about 6000 stocks (active and inactive) and checked dividends using Yahoo.com (from 1980 till 2011) and Earnings.com (from 1992 till 2011). As I expected dividend information for companies that do not exist anymore usually was erased. As the results annual dividends were recorded only for about 3700 companies.

    In the next step I found companies with DG or flat dividends [2] for at least 4 consecutive years. To my surprise about 60% of stocks (i.e. about 2200 firms) pass this filter. It is clear that survivorship is extremely important factor if anybody compares this number with about 450 companies in David Fish's CCC list.

    C) Future next steps

    1. Fill gaps and clean dividend database

    2. Write algorithm to separate most of special dividends from regular dividends..

    3. Handle firms with multiple symbols and few cases when the same symbol was used by different companies in various times.

    4. Write algorithm to figure out how long DG strike was for each company.

    D) Help is needed

    Please let me know if you have access to Compustat or Capital IQ or CRSP database and would like to participate in research. Databases I use are not so good and required more work than above mentioned sources of data.

    Anybody who looks in appendixes in Jeremy Siegel book "The future for investors: why the tried and true triumph over the bold and new" know that a lot of "hand-work" related with a company history is needed. Fortunately Internet allows perform most of this job just from your computer but nevertheless it is time-consuming.

    For example, it is necessary for example separate companies that stopped dividends at least into 2 groups - firms that were liquidated or bankrupted and firms that were merged or acquired. My experience shows that simple Google search with company name is fruitful but again it takes time. I'd appreciate if you donate your time to clean dividend database.

    I'm not a programmer and statistician, so I'd appreciate professional help in such tasks.

    I hope some dividend investors will help me in their spare time. I expect generate proprietary information (for example dividend cut predictors for different industries - similar one I built for banks - see seekingalpha.com/instablog/725729-sds-se...) that will be available only to team members. I expect that some results will be published in academic journals and in public domain [3]. I hope that team work will be fruitful for DG investors.

    Please send me SA email if you want to participate in the project with description what you can do.

    Footnotes:

    1. Seeking Alpha /SA/ articles are exemption.

    2. Sometime I invest in companies with flat high-yield dividends.

    3. Articles with multiple authors are possible in Seeking Alpha according to SA editors.

    6/25/2012

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Comments (3)
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  • What?
    You want free work, yet keep it proprietary?
    21 Jun 2012, 07:28 PM Reply Like
  • Author’s reply » Team members will get all results.
    21 Jun 2012, 08:20 PM Reply Like
  • Author’s reply » Academics often use data from the Center for Research in Security Prices (CRSP). Because the Center initial grant was to study ONLY stock prices, they ignored dividends and therefore their database isn't good for studies needed to understand DGI (see "Errors in Databases Revisited: An Examination of the CRSP Shares-Outstanding Data" / Stephen M. Courtenay, Stuart B. Keller
    The Accounting Review, Vol. 69, No. 1 (Jan., 1994), pp. 285-291
    and
    "Error Rates in CRSP and Compustat Data Bases and their Implications" Barr Rosenberg, Michel Houglet
    The Journal of Finance, Vol. 29, No. 4 (Sep., 1974), pp. 1303-1310
    for details).
    This is one of the reason I started Dividend Heritage project
    9 Jun 2013, 06:20 PM Reply Like
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