Dividend growth investing | Aussie Stock Forums

It is possible to have some kind of dividend growth strategy in Australia but it would be nothing like the strict dividend growth strategies that are often used in the U.S. and the opportunity set of companies is much smaller!

For example the even have an index in the U.S. called the dividend aristocrats index. According to Investopedia “The S&P 500 Dividend Aristocrats Index is a list of companies in the S&P 500 with a track record of increasing dividends for at least 25 consecutive years. It tracks the performance of well-known, mainly large-cap, blue-chip companies.” The S&P 500 Dividend Aristocrats includes stocks with a float-adjusted market capitalization of at least $3 billion and an average trading volume of at least $5 million, in addition to consistently increasing dividend payments. The index typically contains 40 to 50 companies.

If you removed those market cap and share trading volume restrictions listed above to include smaller less liquid stocks you would most likely find 100+ stocks to choose from! I do not think you could even find 5 companies in Australia that have increased dividends every year for 25 years!

But if you relax your standards for example to pick companies that have paid a dividend every year for at least 10 consecutive years and have increased their dividends overall in that time period by at least 50% (without necessarily increasing them every year) and increased the dividend in at least 70% of individual years, etc then you would have a reasonable sized pool of companies to choose from.

But in all honesty because of the tax and superannuation system and shareholder culture in Australia almost all profitable companies with growing earnings (unless they have a very weak balance sheet) eventually will pay a dividend and if earnings are growing that dividend will increase over time. I am confident even companies like Afterpay and Xero etc will eventually pay growing dividends.

Whereas in the U.S. because of the tax system and other factors many growth stocks will go a long time without paying a dividend (e.g. Facebook even though its massive and generates billions in profits does not pay a dividend yet).

Therefore in Australia (unlike the U.S.) rather than having a specific dividend growth strategy, one can merely have a strategy to select sound growing companies knowing that over time you will likely receive a growing dividend stream.

 

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