Calculating dividend growth length

I’ve been quite busy and stressed with Work, so haven’t had time to post much of late. My available free time wasn’t helped by a recent decision to buy a new PC game, Pillars of Eternity, either. This is an old-style RPG that’s similar to the Baldur’s Gate series.

Anyway, you’d think this would be a simple calculation really but there are some complications and factors to consider in this calculation: The definition of a “year” needs to be made, plus the impact of stock splits and the effect of exchange rates for dividends that are paid in non-sterling currencies need to be considered.

I’ve been re-thinking how to calculate the dividend growth length for companies in the UK Dividend Champions List and I’m leaning towards the following approach which is a change to my existing algorithm and hopefully a compromise towards a couple of commenters.

Current calculation method

1. Dividend Growth Length = Calendar Year Growth Length

This is based on my existing calculations using stock splits and exchange rates using the dividends for a calendar year based on the ex-dividend date.

Holding the dividend constant for a calendar year is not considered as an increase.

New calculation method

1. Calculate the Calendar Year Growth Length

Same as I currently do above.

2. Calculate the Financial Year Growth Length

This is calculated based on the dividends paid on a financial year basis but will include adjustments for stock splits and exchange rates.

Holding the dividend constant for a year will not count as an increase.

I’ll consider moving to ignoring exchange rates at a later date but that takes a little more work and I don’t think there are enough companies affected to make it worth prioritizing the effort.

3. Dividend Growth Length = the higher of 1 and 2 above

The Champion/Contender/Challenger determination will use the highest value of the Calendar Year or Financial Year growth length.

So if the Calendar Year growth Length for a company was 10 years and the Financial Year growth history was 15 years, the company would now show in the list as a 15-Year Dividend Contender. In the current UK Dividend Champions List, it’d show as a 10-Year Contender.

Reasons for changing the calculation

So why change the method? As I’m updating DividendChampions.UK, I’m realizing that not every investor is as focused on calendar year income as I tend to be. Since dividend growth length is arguably an indication of company quality, then it seems fairer to include companies that are currently being excluded just because their dividend schedule resulted in a lower calendar year payment. It’ll also allow for a combined list that’s the best of both worlds.

Changing the calculation currently means around 48 companies would see an increase to their history; most increases are just 1 year but some such as VOD and RPS will get higher increases.

But before I start making this change, I wanted to get some feedback from you, Dear Reader. Please let me know if this is a useful change.

 

Quote of the day

Never spend your money before you have earned it.

Monthly Summary – April 2015

Here’s my net worth update and summary for April 2015. April was (yet) another quiet month with no major surprises which is usually good for finances. My musical tastes last month wandered over to A Fine Frenzy, kind of Tori Amos meets Coldplay; in particular her songs You Picked Me and They Can’t If You Don’t Let Them.

In other news, I started my new site, DividendChampions.UK so that’s been keeping me busy and, well that’s about it really. So was April a step forward towards FI or a step backwards?

Continue reading “Monthly Summary – April 2015”

April 2015 – Dividend income and portfolio update

It’s another month and time to report on my dividend income from April. I’ve split my monthly update into two posts starting this month; today’s post focuses on dividend income and my income portfolio. The next post will be on monthly expenses, changes in my Wet Worth and an update to my progress.

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Last purchase in April – Technology stocks

Contrived image of floating icons and tablet that may be related to the Technology sector.
Man deciding if a floating tablet weighs more than some floating icons he found.

Last Tuesday I made my fourth Sharebuilder automatic purchase in April in the Technology sector. This purchase will also be my last automatic purchase as I cancelled the monthly plan which allowed $1 trading fees. Instead I’m switching over to less frequent purchases with the normal $6.95 market commission.

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UK Dividend Champions May 2015 Update

UK Dividend Champions List logo for May 2015 The May 2015 update to the UK Dividends Champions List is now available at DividendChampions.UK.

Most of the changes this month are updating yields and prices so there aren’t too many changes. However 4 companies joined the ranks of Contenders (10+ years) and 2 companies departed the Challengers (5+ years).

Continue reading “UK Dividend Champions May 2015 Update”