tag:blogger.com,1999:blog-35846962033368712012024-03-19T01:48:22.334-07:00Dividend Growth InvestorI am a long term buy and hold investor who focuses on dividend growth stocksDhttp://www.blogger.com/profile/11197290990687067072noreply@blogger.comBlogger234413tag:blogger.com,1999:blog-3584696203336871201.post-72847864704077927342024-03-18T22:30:00.000-07:002024-03-18T22:30:00.271-07:00Schwab Dividend Index 2024 Annual Reconstitution <p>The Dow Jones U.S. Dividend 100 Index is designed to measure the performance of high-dividend-yielding stocks in the U.S. with a record of consistently paying dividends, selected for fundamental strength relative to their peers, based on financial ratios.</p><p>The index universe is defined as the constituents of the Dow Jones U.S. Broad Stock Market Index, excluding REITs.. Source: <a href="https://www.spglobal.com/spdji/en/documents/methodologies/methodology-dj-dividend-indices.pdf" target="_blank">S&P Global</a></p><p>Stocks must pass the following screens:</p><p>• Minimum 10 consecutive years of dividend payments</p><p>• Minimum FMC of US$ 500 million</p><p>• Minimum three-month ADVT of US$ 2 million</p><p>Stocks that pass all screens are ranked by dividend yield. The top half are eligible for inclusion. </p><p>Constituent selection is as follows:</p><p>1. The eligible securities are ranked by each of four fundamentals-based characteristics:</p><p>• Free cash flow to total debt: Annual net cash flow from operating activities divided by total</p><p>debt. Companies with zero total debt are ranked first.</p><p>• Return on equity: Annual net income divided by total shareholders’ equity.</p><p>• IAD yield</p><p>• Five-year dividend growth rate </p><div><div>2. The four rankings are equal weighted to create a composite score, and the eligible securities are</div><div>ranked based on this composite score.</div><div><br /></div><div>3. The 100 top-ranked stocks by the composite score are selected to the index, subject to the</div><div>following buffer rules that favor current constituents during the annual review.</div><div><br /></div><div>• The constituent stocks will remain in the index as long as they are among the top 200</div><div>rankings by the composite score.</div><div>• Non-constituent stocks are added to the index based on their rankings until the</div><div>constituent count reaches 100.</div><div>• If two non-constituents have the same composite score, the non-constituent with the</div><div>higher dividend yield will be selected.</div></div><p><br /></p><p>Stocks in the index are weighted quarterly, based on a capped FMC weighted approach. No single stock can represent more than 4.0% of the index and no single Global Industry Classification Standard (GICS®) sector can represent more than 25% of the index, as measured at the time of index construction, annual rebalancing, and quarterly updates. </p><p>The index is subject to a daily weight cap check. If the sum of stocks with weights greater than 4.7% exceeds 22%, the index is re-weighted using a quarterly weighting method.</p><p><br /></p><p>The index is the benchmark used by the popular dividend ETF the Schwab US Dividend Equity ETF (SCHD). It is rebalanced once per year. This years re-constituting just happened. I <a href="https://www.dividendgrowthinvestor.com/2016/05/best-dividend-etf-to-consider.html" target="_blank">actually reviewed the ETF in 2016</a>, and didn't hate it. However I did not buy it then because I <a href="https://www.dividendgrowthinvestor.com/2022/08/dividend-stocks-versus-dividend-etfs.html" target="_blank">did not like the high turnover</a>.</p><p>The column on the left shows the 24 companies that were removed. The column on the right shows the 24 companies that were added.</p><p></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEheYPB3AXyNoDDdLA-pFBJFoR8Ak7s0oXI-nJBfP4SH77asPeiOJM7TMZH_RO8W8pnrjuFSbZJxkpxfQ9NdXH9SeofoiUCTPl3nFvJNMkq12F9wpq86AhsOpOk7GEoMg3aZcSN7MTqhxBEfycv1OU1AElN2NQyaKYebtGn-MSk-i8YCybK_3Dm0LCg1cUk" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="530" data-original-width="728" src="https://blogger.googleusercontent.com/img/a/AVvXsEheYPB3AXyNoDDdLA-pFBJFoR8Ak7s0oXI-nJBfP4SH77asPeiOJM7TMZH_RO8W8pnrjuFSbZJxkpxfQ9NdXH9SeofoiUCTPl3nFvJNMkq12F9wpq86AhsOpOk7GEoMg3aZcSN7MTqhxBEfycv1OU1AElN2NQyaKYebtGn-MSk-i8YCybK_3Dm0LCg1cUk=s16000" /></a></div><br />Note I created this list myself by comparing the holdings in the Schwab Dividend ETF today at the Schwab website, versus the holdings int he Schwab Dividend ETF as of Feb 29, available on the Fidelity Study.<p></p><div>It looks like the turnover accounted for something like 24% - 25% of the portfolio weightings. The largest components being taken out include Broadcom (AVGO) with a 5.07% weight, Merck (MRK) with a 4.69% weight and ADP (ADP) with a 3.09% weight.</div><div><br /></div><div>In general I dislike high turnover, because it means that this ETF holds stocks on average for 4 - 5 years only. The number of companies I am investing in is not stable, so in effect it is as if I am investing into a trading strategy almost. I prefer to hold a more passive approach to investing, with low turnover and rarely selling anything. I also prefer to build my own portfolios at home, one company at a time. That way I can control:</div><div><br /></div><div><div><br /></div><div>1. What companies go in the portfolio</div><div>2. The entry valuations</div><div>3. Portfolio weights</div><div>4. Holding period/Turnover</div><div>5. Cost</div></div><div><br /></div><div><br /></div><div>Whether you should buy individual dividend growth stocks or dividend growth etf however <a href="https://www.dividendgrowthinvestor.com/2022/08/dividend-stocks-versus-dividend-etfs.html" target="_blank">is another trade-off</a> you have to accept for yourself.</div><div><br /></div><div>Relevant Articles:</div><div><br /></div><div>- <a href="https://www.dividendgrowthinvestor.com/2022/08/dividend-stocks-versus-dividend-etfs.html" target="_blank">Dividend Stocks versus Dividend ETFs</a></div><div>- <a href="https://www.dividendgrowthinvestor.com/2016/05/best-dividend-etf-to-consider.html" target="_blank">The Best Dividend ETF to Consider</a></div><div>- <a href="https://www.dividendgrowthinvestor.com/2018/02/the-best-dividend-etf-in-accumulation.html" target="_blank">The Best Dividend ETF In The Accumulation Phase</a></div><div>- <a href="https://www.dividendgrowthinvestor.com/2010/07/dividend-etf-or-dividend-stocks.html" target="_blank">Dividend ETF or Dividend Stocks?</a></div><div>- <a href="https://www.dividendgrowthinvestor.com/2014/04/dividend-etfs-are-bad-for-investors.html" target="_blank">Dividend ETF’s Are Bad for Investors: Here is Why</a></div><div><br /></div><div><br /></div>Dhttp://www.blogger.com/profile/11197290990687067072noreply@blogger.comtag:blogger.com,1999:blog-3584696203336871201.post-2782995989317527942024-03-18T01:00:00.000-07:002024-03-18T01:00:00.135-07:00Five Dividend Growth Companies Increasing Dividends Last Week<p>I review the list of dividend increases every week, as part of my monitoring process. This exercise helps me monitor existing holdings but also identify companies for further research. I usually focus on the companies that have managed to increase dividends for at least ten years in a row. </p><p>A long history of annual dividend increases does not happen by accident. It is usually a result of a strong business that generates excess cashflows. But as we all know, past performance is also not always an indication of future results.</p><p>This exercise simply puts companies on my list for further research. Afterwards, <a href="https://www.dividendgrowthinvestor.com/2024/03/six-dividend-growth-stocks-raising.html" target="_blank">I review each company briefly</a>, before determining if I should pursue the idea further or set it aside.</p><p>Over the past week, there were 23 companies that increased dividends to shareholders in the US. Five of these companies have managed to increase dividends for at least ten years in a row.</p><p><br /></p><p><b>Colgate-Palmolive Company (CL) </b> manufactures and sells consumer products in the United States and internationally. It operates through two segments: Oral, Personal and Home Care; and Pet Nutrition.</p><p>The company increased quarterly dividends by 4.20% to $0.50/share. This is the 61st consecutive annual dividend increase for this <a href="http://www.dividendgrowthinvestor.com/p/dividend-kings.html" target="_blank">dividend king</a>. Over the past decade, the company has managed to increase dividends at an annualized rate of 3.68%.</p><p>Between 2014 and 2023 the company grew earnings slightly from $2.36/share to $2.77/share. The company is expecting to earn $3.49/share in 2024.</p><p>The stock sells for 25.35 times forward earnings and yields 2.26%.</p><p><br /></p><p><b>Shoe Carnival, Inc. (SCVL)</b> operates as a family footwear retailer in the United States.</p><p>The company increased quarterly dividends by 12.50% to $0.135/share. This is the 12th consecutive annual dividend increase for this <a href="http://www.dividendgrowthinvestor.com/2011/01/dividend-achievers-offer-income-growth.html" target="_blank">dividend achiever</a>. Over the past decade, the company has managed to grow dividends at an annualized rate of 13.56%.</p><p>The company has managed to grow earnings from $0.66/share in 2014 to $4/share in 2023. The company is expected to earn $2.70/share in 2024.</p><p>The stock sells for 12.06 times forward earnings and yields 1.65%.</p><p><br /></p><p><b>Steel Dynamics, Inc. (STLD)</b> operates as a steel producer and metal recycler in the United States.</p><p>The company raised quarterly dividends by 8.20% to $0.46/share. This is the 15th consecutive annual dividend increase for this <a href="http://www.dividendgrowthinvestor.com/2011/01/dividend-achievers-offer-income-growth.html" target="_blank">dividend achiever</a>. Over the past decade, the company has managed to increase dividends at an annualized rate of 14.15%.</p><p>Between 2014 and 2023, the company managed to grow earnings from $0.68/share to $14.72/share.</p><p>the company is expected to earn $10.59/share in 2024.</p><p>The stock sells for 13 times forward earnings and yields 1.33%.</p><p><br /></p><p><b>UDR, Inc. (UDR)</b>, an S&P 500 company, is a leading multifamily real estate investment trust with a demonstrated performance history of delivering superior and dependable returns by successfully managing, buying, selling, developing and redeveloping attractive real estate communities in targeted U.S. markets.</p><p>The company increased quarterly dividends by 1.20% to $0.425/share. This is the 14th consecutive annual dividend increase for this <a href="http://www.dividendgrowthinvestor.com/2011/01/dividend-achievers-offer-income-growth.html" target="_blank">dividend achiever</a>. Over the past decade, this REIT has managed to grow dividends at an annualized rate of 5.89%.</p><p>UDR grew FFO/share from $1.58 in 2014 to $2.46 in 2023.</p><p>This REIT is expected to generate $2.45/share in FFO in 2024.</p><p>The stock sells for 15.14 times FFO and yields 4.57%.</p><p><br /></p><p><b>Williams-Sonoma, Inc. (WSM)</b> operates as an omni-channel specialty retailer of various products for home.</p><p>The company increased quarterly dividends by 26% to $1.13/share. This is the 18th consecutive annual dividend increase for this <a href="http://www.dividendgrowthinvestor.com/2011/01/dividend-achievers-offer-income-growth.html" target="_blank">dividend achiever</a>. Over the past decade, the company has managed to grow dividends at an annualized rate of 11.71%.</p><p>Between 2015 and 2024, the company has managed to grow earnings from $3.30/share to $14.71/share.</p><p>The company is expected to earn $15.13 in 2024.</p><p>The stock sells for 18.76 times forward earnings and yields 1.59%.</p><p><br /></p><p>Relevant Articles:</p><p>- <a href="https://www.dividendgrowthinvestor.com/2024/03/17-dividend-growth-stocks-raising.html" target="_blank">17 Dividend Growth Stocks Raising Shareholder Distributions</a></p><div>- <a href="https://www.dividendgrowthinvestor.com/2024/03/six-dividend-growth-stocks-raising.html" target="_blank">Six Dividend Growth Stocks Raising Shareholder Distributions</a></div><div><br /></div><div>- <a href="https://www.dividendgrowthinvestor.com/2024/02/16-dividend-growth-companies-that.html" target="_blank">16 Dividend Growth Companies That Increased Dividends Last Week</a></div><div><br /></div><div>- <a href="https://www.dividendgrowthinvestor.com/2024/02/eighteen-companies-rewarding.html" target="_blank">Eighteen Companies Rewarding Shareholders With a Raise</a></div><div><br /></div>Dhttp://www.blogger.com/profile/11197290990687067072noreply@blogger.comtag:blogger.com,1999:blog-3584696203336871201.post-71683717082135145372024-03-13T01:00:00.000-07:002024-03-13T04:45:10.301-07:00The Return of the Dividend<p>A pattern of steady dividend payments and dividend increases is only possible if a business can generate enough cashflows to support operations and expansion, while also generating torrents of excess free cash flows.</p><p>That dividend provides signaling value to shareholders that there are indeed solid and dependable cashflows to support it. Those cashflows are also supported by the business.</p><p>In fact, in the old days (prior to the 1980s), investors would not touch a stock that didn't pay a dividend. The idea was that a company which does not pay a dividend simply cannot afford to pay it. It was a speculative company that typically didn't earn much money.</p><p>Since the days of the 1990s and the tech bubble, investors have been shunning dividends, and focusing only on the share price. It takes a few bear markets to remind investors that trees do not grow to the sky. </p><p>At some point, a stable dividend generated from a good business can be a major calming force during a bear market or an extended flat market. For a company that generates a ton in cashflows, it makes little sense not to pay a dividend. Dividends provide management with focus on the projects with the highest return on investment. Having that focus and a hurdle rate, coupled with a regular commitment to shareholders, makes it less likely that management teams would do something silly with the money. A stable and growing dividend also signals maturity and stability in cashflows. </p><p>When management teams are swimming in cash, they could focus on projects of dubious value, get more perks like corporate jets, and other silliness. That dividend provides focus and discipline to the capital allocation process.</p><p>Over the past several weeks, there were several notable dividend initiators.</p><p>Those include:</p><p>Meta (META), which initiated a quarterly dividend of $0.50/share in February.</p><p>Booking Holdings (BKNG), which initiated a quarterly dividend of $8.75/share in February.</p><p>Salesforce.com (CRM), which initiated a quarterly dividend of $0.40/share in February.</p><p><br /></p><p>It would be interesting to see if these companies manage to grow those dividends from here as well.</p><p>It seems as if companies are finally wisening up and sharing their generous cashflows with shareholders.</p><p>I would welcome seeing more tech juggernauts that can afford to pay a dividend actually starting to pay dividends. One that's long overdue is Alphabet (GOOG).</p><p>It would be interesting to see if number of payers on the S&P 500 increases as well. These are the trends we are witnessing as of this year:</p><p></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEhURLZNeYq2KQiEDfBQ88CT6zAScj6dMuE_g4aR398PZfwxgD4izLkfIIbsIe0tfUMrgQRAMO3yd1SFjtsrRyaL-XBSAWxZOW_dGQTkbya2Kk1zYqai9ZWI5whwsS5ZKJlUsyoTwDwP88aG1ureXwc9bYvNC4jrd4NEVtV32UVgqqP9XlNTqcW0pkx4pZg" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="521" data-original-width="835" height="400" src="https://blogger.googleusercontent.com/img/a/AVvXsEhURLZNeYq2KQiEDfBQ88CT6zAScj6dMuE_g4aR398PZfwxgD4izLkfIIbsIe0tfUMrgQRAMO3yd1SFjtsrRyaL-XBSAWxZOW_dGQTkbya2Kk1zYqai9ZWI5whwsS5ZKJlUsyoTwDwP88aG1ureXwc9bYvNC4jrd4NEVtV32UVgqqP9XlNTqcW0pkx4pZg=w640-h400" width="640" /></a></div><br />On a side note, this increase in number of dividend paying companies, particularly in the tech sector, is not new. We saw that a little over a decade ago. Please check the relevant articles below:<p></p><div><br /></div><div>Relevant Articles:</div><div><br /></div><div>- <a href="https://www.dividendgrowthinvestor.com/2009/03/dividends-are-powering-up-tech-sector.html" target="_blank">Dividends are Powering Up the Tech Sector</a></div><div>- <a href="https://www.dividendgrowthinvestor.com/2010/09/has-time-for-tech-dividends-arrived.html" target="_blank">Has the time for Tech Dividends arrived?</a></div><div>- <a href="https://www.dividendgrowthinvestor.com/2011/12/tech-dividends-on-rise.html" target="_blank">Tech Dividends on the Rise</a></div><div>- <a href="https://www.dividendgrowthinvestor.com/2021/11/dividend-initiators-fertile-ground-for.html" target="_blank">Dividend Initiators: A Fertile Ground For Research</a></div><div><br /></div><div><br /></div>Dhttp://www.blogger.com/profile/11197290990687067072noreply@blogger.com