The Dividend Achievers Index refers to all public companies that have successfully increase their dividend payments for at least ten consecutive years. While the Dividend King list includes 19 companies and the Dividend Aristocrats 52, the Dividend Achievers list now counts 265 companies.
For those who didn’t know The Dividend Achievers list was introduce by Moody’s back in 1979. Their investor service developed a model to determine which are the best dividend paying stocks. In 2012, Nasdaq bought the brand and declined this index in many sub-categories.
Over the years, I’ve built my own model to identify the best dividend paying companies. The core of my investment strategy has been built around dividend growth. Overtime, I didn’t want to limit myself among a short list of 19 or 51 companies and rather starting the study of a wider group; the achievers. With the right combination of metrics, this list is probably the best starting point to build your dividend growth portfolio or to find your next addition.
How to Download the Dividend Achievers List
Instead of simply send you toward the composition of the PowerShares Dividend Achievers Portfolio from Invesco, I decided to take the download the list and add my own sets of metrics. You can then now download the dividend achiever list including the following features:
- Company Name
- Dividend Yield
- 5 yr Dividend growth
- 5 yr Revenue growth
- 5 yr EPS growth
- Payout ratio
- Cash Payout ratio
- P/E ratio
- Dividend Discount Model valuation (work in progress)
ENTER YOUR NAME AND EMAIL TO DOWNLOAD THE FREE DIVIDEND ACHIEVERS EXCEL SPREADSHEET NOW!
*Please note that I will update metrics on this list quarterly and update the full list once a year when Invesco proceed with their addition and deletion. The new Achiever list will be automatically sent to my readers.
I’ve combined my 7 investing rules the Achievers List
The list you just downloaded is a combination of my set of metrics I follow according to the 7 dividend growth investing principles and a list of strong dividend payers. Instead of searching through a universe counting thousands of stocks, we already reduce the number to 265. You know for sure those companies have been generous with their shareholders for over a decade.
Over the next 12 months, I will be going through each company on this list and make a complete analysis. I will gradually add the Dividend Discount Model valuation to the list as a complete my report on each business.
How I use this powerful list to its full potential
I wanted to create a list that would satisfy most investors by meeting several needs. It would be foolish to select any companies from this list solely based on the fact management has issue raising payouts for over ten years.
If you are looking for a higher income, you can sort the list through dividend yield. You can then double check with the payout and cash payout ratio to make sure company distributions are not at risk. Remember that the payout ratio is calculated based on earnings. As earnings is calculated based on General Accepted Accounting Principles (GAAP), a company could show a high payout ratio, but a lower cash payout ratio. We use the following metrics from Ycharts using the following definition:
“Proportion of free cash flow (after preferred dividends) that is paid as dividends to common shareholders. If Microsoft generates 50 million in operating cash flow, has capital expenditures of 20 million, pays preferred dividends 10 million and pays common dividends 5 million, Microsoft has a cash dividend payout ratio of 25%. 5/(50-20-10)
Because net earnings can be easily manipulated and cash flows are harder to manipulate, this ratio is useful to analyze cash flow being paid in dividends. If this number is consistently high, or greater than 1, it indicates that the firm is paying out more in dividends than it is receiving in actual cash.”
Cash Dividend Payout Ratio = Common Stock Dividends / (Cash Flow from Operations – Capital Expenditures – Preferred Dividends Paid)
Payout ratios are normally calculated as Dividends/Net Income. To get a more accurate picture of cashflow available to shareholders, the above formula can be used instead.”
By combining both dividend yield and payout ratios, you will be in a better position to identify high yielding stocks that have better chance of increasing their distribution in the future.
If you are looking more for growth, I’d suggest sorting this list by the “5yr dividend growth” rate and double check this metrics with the “5yr revenue growth” and “5yr EPS growth”. In an ideal world, you would find a company showing consistent rate among dividend, revenue and earnings growth.
A sound company shows a strong business model enabling revenue growth. As sales increase, earnings should follow a similar trend. Then, it becomes easy for management to increase their distribution year after year.
Finally, if you are looking for the most undervalued stocks, I’d suggest you sort companies using the Dividend Discount Model valuation. The % indicate the premium (positive) or the discount (negative). Therefore, you are looking at the biggest negative numbers in this column. I’ve also included the P/E ratio, but it is important to compare this date to its industry and not to the global market. As mentioned earlier in this article, the Achiever list is a good start for search high quality company, but further analysis will be required.
Why the Achievers and not the Aristocrats?
If you have done your own research on dividend aristocrats, I’m positive you have seen how this elite group of companies outperformed the S&P 500 over the past decade:
The problem when you want to look at the Dividend Achievers performance is that the index has changed hands in late 2012 (it was bought by Nasdaq from Mergent). Therefore, we only have three years of history to compare:
As you can see, the Achievers stared performing well after the market experienced higher volatility. If we use the previous index managed by Mergent (the US Broad Dividend Achievers), we get a similar result:
Therefore, what is the purpose of taking the achievers over the aristocrats as both group seems to outperform the overall market for over a decade?
The first reason is because the aristocrats are simply not enough to create an interesting list. If I had to build a portfolio with 20 to 30 holdings, I need to select more than 50% of this list. You would then be better of buying shares of NOBL (ProShares S&P 500 Dividend Aristocrats ETF) and be done with it.
Which leads me to the second reason why I prefer the Achievers instead; this index has not only more stocks, but it also has a wider diversification.
As you can see, there is a clear dominance of 3 sectors (consumer defensive, industrials and healthcare) covering 60% of the aristocrats group. When you perform the same exercise with the achievers, you get a completely different result:
The same three sectors now only count for 36% and you have more weight towards Utilities, Real Estate and Financial Services. You also have the introduction of a new and very interesting sector: Technology. Companies such as Microsoft (MSFT) and Qualcomm (QCOM) are part of a completely new economy and offer another type of opportunity for investors.
By definition, I also appreciate a shorter dividend growth rate horizon (ten years) as this index can rapidly catch interesting companies. Companies like Apple (AAPL) (5 years consecutive increase), BlackRock (BLK) (7 years) and Disney (DIS) (8 years) are soon to be part of the Achievers group, but they are still a long road before reaching the Aristocrats status.
A Decade of Growth is Not Everything
I can’t stress enough the importance of not depending on a single metric to invest in a company. I don’t believe there are 265 amazing companies you should buy. The Dividend Achievers List is a very good start but further analysis is mandatory before making any transactions.
Let me know if this list is helpful and how I can improve it!
Disclaimer: I hold AAPL, BLK, DIS, MSFT in my DSR portfolios.