Not All Dividend Increases Are The Same: A Search For Consistent Proportional Increases

by: Accelerating Dividends


When you think of dividend increases, you immediately think about the increase in cash value. But whenever a dividend increases, there are two trends to look at. The first trend is the difference in the cash value of the dividend. The second is the proportional difference of that cash value between years. As dividend growth investors, there is a tendency to focus exclusively on the cash value increase. However, I argue that just as important as the cash value difference is the proportional difference of each and every one of those dividend increases. The reason is that not all increases are positive. For example, a cash dividend may increase over time showing a great upward trend graph. However the opposite can happen with the proportional differences. If the cash increases slow down, you will have a proportional graph with a downward trend. I feel that it is important to highlight this. Dividend growth investors want increasing dividends but they should also want those dividends to increase in proportion or be maintained consistently.

Here is an example of what I am saying. As I showed in a recent article, Johnson & Johnson (NYSE:JNJ) has a beautiful graph that shows the upward trend for cash dividends each year (the first graph). This is good and exactly what dividend growth investors want to have happen. However, what they might not like to see is the second graph shows via the red line a downward trend in the proportion of those cash dividends. This shows that although Johnson & Johnson continue to increase their dividends annually, the percentage in which they are increasing those cash dividends is reducing. We talk about how past performance does not guarantee future outcomes and this is true. However it does provide needed insight. Now, as most will know by now, the trend has been slightly bucked as JNJ announced on April 25th that it increased its dividend by 8.2%. This is good nevertheless the 10-year trend remains downward although the five year trend has now turned upward if we compare 2013 with 2009 (this is not shown on the graph). Does this mean that JNJ will now begin to increase the percentage of their cash dividend higher than previous years? Tough to say, however they may follow the same pattern found from 2009 to 2011. The 2010 proportional increase was greater than 2009, but in 2011 it less than 2010.

Johnson & Johnson Graph

I have received a great deal of comments from my other article that I have not considered in this one, but will hope to address some of those comments in a future article where I can draw out the best examples. At the moment, I merely want to identify as many companies that are proportionally increasing their dividends year over year for my own research purposes and general information.


The data for this article comes from David Van Knapp's article (found here) where he details all the comments he received regarding his survey from self-identified dividend growth investors about what companies they actually hold in their portfolio. There are some differences from the list of companies in his first article where there were 39 companies. I see that there are 32 companies that did not appear on that first list. In my article that used the initial 39 companies, I found only seven companies that had a 10 year and 5 year upward trend in proportional dividend changes (you can see the article here). I feel these seven companies should be among the first companies evaluated if you are a new dividend growth investor because of their dividend increases. This article seeks to expand that list of seven companies by seeing if any of the 32 companies found by David Van Knapp's survey meet the criterion.

Using David Van Knapp's 32 dividend paying companies, I then researched the proportional increase in annual dividends for each company using David Fish's Dividend CCC Spreadsheets (you can download his spreadsheets here). Table 1 presents the annual proportional dividend change from 2003-2012. Values in red indicate a proportional decrease from the previous year. Values in green indicate a proportional increase from the previous year. Values in yellow indicate that there was no change in the proportion from the previous year. Dashes mean that I could not obtain the information for that year or that dividends were not paid during that period.

I should note here that when I speak of increases, I am referring to the proportional dividend increase of a given year being greater than the previous year. The distinction is important because most of the companies increased their cash dividends by a certain percentage, but that percentage was either greater or less than the previous year's increase. When I speak of decreases, I am referring to the proportional dividend decrease of a given year being less than the previous year.


From Table 1, we can see when comparing 2011 to 2012 that 17 out of 32 companies (53.1%) did not increase the dividend proportion in 2012 above the 2011 increase. In addition, there are only four companies that have proportionally increased the dividend for the previous two consecutive years [Air Products amd Chemicals Inc (NYSE:APD), Caterpillar (NYSE:CAT), Harris Corporation (NYSE:HRS) and National Retail Properties (NYSE:NNN)].

In this list are several companies that have cut their dividend [BCE Inc. (NYSE:BCE), General Electric (NYSE:GE), and Wells Fargo & Co. (NYSE:WFC)], or who have not changed their dividend over the course of several years [Dynex Capital (NYSE:DX), and Lorillard (NYSE:LO)].

This analysis leaves out Apple (NASDAQ:AAPL), AbbVie (NYSE:ABBV), American Captial Agency (NASDAQ:AGNC), Cisco (NASDAQ:CSCO), DX, Kinder Morgan (NYSE:KMI), Kraft (KRFT), LinnCo (LNCO), Phillips 66 (NYSE:PSX) and Royal Dutch Shell PLC (NYSE:RDS.B) since they do not have a sufficient dividend history to assess the dividend trends. Having said that, RDS.B does have 6 years of dividend history and based on the 5 year trend the proportional dividend trend is decreasing.

Table 1: Annual Proportional Dividend Change from 2003-2012

Table 1: Annual Proportional Dividend Change from 2003-2012

Table 2 shows the number of years in which the dividend proportion increased, decreased or remained unchanged.

Table 2: Number of Proportional Annual Dividend Increases and Decreases

Table 2: Number of Proportional Annual Dividend Increases and Decreases

The following is the list of companies with proportional decreases, increase and sporadic proportions. Companies found on the decreasing list have a 10 and 5 year proportional dividend that has generally been decreasing. Also, any company whose proportional dividend has been decreasing for 4 out the last 5 years.

Decreasing List: DX, Enterprise Products Partners (NYSE:EPD), HRS, Illinois Tool Works (NYSE:ITW), Kinder Morgan Energy L.P. (NYSE:KMP), Realty Income (NYSE:O), Omega Healthcare Investors (NYSE:OHI), Vodafone (NASDAQ:VOD).

Here are a few graphic examples.

Harris HRS Graph

Kinder Morgan L.P. KMP Graph

Vodafone VOD Graph

Companies on the sporadic list generally have either an increasing 10 or 5 year proportional dividend. This means that one was increasing while the other was decreasing. Also being considered is whether over the last 5 years the company has had at least 2-3 years of proportional dividend increases.

Sporadic List: APD, Avista (NYSE:AVA), BHP Billion (NYSE:BBL), BCE, CAT, Conoco Phillips (NYSE:COP), CSX Corp. (NYSE:CSX), Darden Restaurants (NYSE:DRI), GE, Genuine Parts (NYSE:GPC), LO, NNN, Norfolk Southern (NYSE:NSC), and WFC.

Here are a few graphic examples.

Air Products & Chemicals APD Graph

Caterpillar CAT Graph

Genuine Parts GPC Graph

Norfolk Southern NSC Graph

Companies on the increasing list have proportional dividends that have been generally increasing over the last 10 and 5 years.

Increasing List: None


This analysis was not as evident as my previous article. I was very surprised that none of the companies meet the criterion for the increasing list. There are however a few companies from this analysis that are interesting. I had a hard time placing HRS on the decreasing list, and GIS on the sporadic list. HRS has increased its cash dividend on average 27.19% per year over the past 10 years. That is impressive. They have had two periods where the proportions were considerably reduced however this may still be an impressive dividend paying machine.

GIS has a nice graph except for the last two years. As pointed out by some, we cannot expect continued proportional increases in the dividend year over year. GIS may have just reached that point. I am inclined to consider GIS as a company on the increasing list if not for a flat 5 year trend (see the graph below).

General Mills GIS Graph

WFC was included in the sporadic list but the graph could have easily qualified the company for the increasing list. The real trouble that kept them from being included on the increasing list was the cut to their dividend during the financial crisis. Although the company has made some considerable proportional dividend increases since cutting the dividend, they do not have the nice steady increases that Chevron (NYSE:CVX) and Walgreen Co. (WAG) do from my previous article. We really can't classify dividend cuts as a steady increase although it appears that the dividend is heading in the right direction again.

Based on this analysis, I like HRS and GIS even though they are not found on the increasing list. With Q1 earnings being released and dividend increases expected, HRS and GIS may be able to improve their proportional dividend trends during this year.

Disclosure: I am long OHI, JNJ, CVX. 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.