Dividend Growth Performance – 2011 to 2015

After writing the review of my portfolio performance, I realized that the dividend growth performance chart I put in was completely inaccurate. So here’s an updated look along with a couple of obvious but perhaps overlooked points.

What went before

Here’s the original diagram that I had in my review.

It’s correct in that it shows the percentage increase of each quarter over the starting quarter’s dividend. But it’s misleading because the average quarterly growth of dividends depends on the dividend schedule of the stocks in question. Comparing the 2015 Q4 dividend to the 2011 Q2 dividend does not produce the real percentage increase for 2015; this needs to be done on an annual basis instead. So I started over.

The Dividend Growth Tube Chart

Shown below is a plot of the dividend growth performance of all dividends in my portfolio from 2011 to 2015. I’m calling this my “Dividend Growth Tube Chart” since it reminds me of the London Tube (Subway) map. Well maybe if you squint enough. It’s not much clearer than the previous chart but bear with me; we’ll get there.

Each line is a single stock and shows its dividend growth increase over the time period. Since the values are percentages they can be compared to each other. I’ll use Marriott International (MAR) values as an example of how it’s calculated; this just happens to be the best performer on the chart (the top orange line).

 MAR 2011 2012 2013 2014 2015 DPS (\$) 0.37 0.49 0.64 0.77 0.95 Growth % 0 31.92 72.3 107.3 155.76

The growth for 2011 is 0% since that’s the starting point. For 2012 the dividend increased from \$0.37 to \$0.49 per share; this is equal to a 32% increase: ((\$0.49 / \$0.37) – 1) * 100. Likewise the 2013 value was an increase of 72% from the 2011 value: ((\$0.64 / \$0.37) – 1) * 100 = 72.3%.

Certainly Marriott plc has been on a roll for last 4 years and its dividend is picking up, although its yield is low at 1.6%.

Bringing up the rear, the bottom line on the chart is AT&T (T) who only managed a total dividend growth of 9.3% over the time period. That’s pretty low but it’s still keeping above inflation with an annual increase of 2% and has a higher yield of 5.4%.

As for the rest of the lines, they’re pretty much all over the place, although the majority of them tend to be towards the bottom since I typically choose higher yield and lower growth dividend stocks.

The top five stocks (highest first) are

1. Marriott plc (MAR): 156%
2. Limited Brands (LB): 150%
3. Union Pacific (UNP): 128%
4. Home Depot (HD): 127%
5. Qualcomm (QCOM): 120%

The bottom five stocks (highest first) are:

1. Intel Corporation (INTC): 23%
2. Great Plains Energy (GXP): 19%
3. Bemis (BMS): 17%
4. Verizon (VZ): 13%
5. AT&T (T): 9.3%

Moving the needle black line

The next chart shows the average dividend increase of the stocks I hold. This is still a theoretical result because it’s not weighted by the number of stocks that I hold, but it does highlight an interesting point.

The black line is the total DPS of each year divided by the starting DPS in 2011; this is equally weighted across the 41 stocks so It represents 1/41th of Marriott’s increase plus 1/41 of T’s increase and so on for all the stocks in the list.

This yields an average growth of 50% over the last 4 years; which amounts to an annual increase of 11% each year; a pretty good pay increase if you ask me.

Now the black line falls towards the bottom half of the range; it’s nearer T’s value than MAR’s. The reason for this is simply that more stocks had lower dividend growth in my portfolio than higher growth.

In reality the line will be moved up or down based on the proportion of each stock to the whole portfolio. So if I had owned only \$1000 of Marriot and \$100 of T, I would have obtained an overall growth of (1000/1100 * 156%) + (100/1100) * 9%) = 142.64%. I didn’t make this calculation because the composition of my portfolio continually changes as I add stocks to it so it’s a lot of work; I was more interested in how the stocks I currently own performed.

But dividend growth percentages can be an additional factor in your portfolio allocation if you’re trying to meet a particular growth target; although it comes with the burden of deciding what to do with stocks that slow down their growth. Personally, I don’t try to meet a particular target; I’m happy if the increase is above 2% a year to beat inflation.

Comparison with the benchmark

I compared the average performance of my portfolio dividend growth with my benchmark fund VHDYX and also the S&P-500 fund VFIAX, expecting that my portfolio average would at least beat VHDYX for dividend growth based on the chart shown at the start of this post. Here’s the result…

Nope, it didn’t. VHDYX increased from \$0.51 a share in 2011 to \$0.83 in 2015, a 64% increase (13% annually) which beats the average increase of 50% (11% annually). It actually beat 29 of the stocks I hold; only the following 12 stocks beat it:

 Symbol Total Growth Current Yield (%) MAR 155.76% 1.63 LB 150.00% 2.15 UNP 127.98% 2.97 HD 126.92% 1.97 QCOM 122.75% 4.04 JPM 110.00% 3.02 WPPGY 106.67% 3.21 DOW 91.11% 4.09 MSFT 89.71% 2.55 LMT 89.23% 2.86 CB 77.33% 2.4 TROW 67.74% 3.17 VHDYX 64.50% 3.39

Keeping in mind that VHDYX is a fund consisting of 433 dividend paying stocks, it still manages to show good growth with a reasonable yield. As a case in point, the fund holds Kinder Morgan (KMI) which recently cut dividends by 75%. However since KMI is only 0.3% of the fund holdings its impact will be pretty small on the overall result; if KMI’s yield falls too much it’ll be automatically replaced by another stock depending on the index criteria.

Here are the final numbers from my average and the benchmarks:

 Dividend Growth (%) 2011 2012 2013 2014 2015 My portfolio average 0 13.44 16.06 38.76 50.29 VHDYX 0 20.91 32.94 44.97 64.5 VFIAX 0 19.5 31.05 47.15 65.73

VHDYX increased its distribution from \$0.51 in 2011 to \$0.83 in 2015; a 64% increase with a yield of 3.39%.
VFIAX increased its distribution from \$2.39 in 2011 to \$3.96 in 2015; a 66% increase with a yield of 2.14%.

Here’s a summary of the overall distribution.

Conclusion

It’s possible that my portfolio beat the benchmark in actual performance because of the market weighting. But it’s unlikely because a fair amount of my portfolio is in T, PG, EMR, XOM, JNJ, PFE and MCD which all had significantly less growth than the benchmark. The majority of my stocks fell in the 25% to 60% range.

Perhaps it’s because I’m hungry, but my mental model of my Income Fund is a meal; VHDYX is the meat & potatoes while individual stocks are the salt and pepper that I can add to improve the taste.

Quote of the day

It is a mistake to think you can solve any major problems just with potatoes.

8 thoughts on “Dividend Growth Performance – 2011 to 2015”

1. remembertowater says:

Very impressive – and not a single one was negative from 2011 levels!

1. Hi remembertowater,

Yes only one stock froze its dividend for a year in the 4 year period (Intel – INTC) this lowered its overall growth.

Next year’s results might be different since BBL is likely to cut their dividend and CVX will likely continue holding theirs flat. So we’ll see what happens.

Thanks for stopping by!
Best wishes,
-DL

1. remembertowater says:

As long as BBL doesn’t cut by more than \$0.46+ it will still be up from 2011 🙂 Fingers crossed.

1. Well I hope so but I think they’ll cut by a lot more than that…the yield right now is 15%; a more ‘normal’ yield of 5 or 6% would put the dividend to between \$0.8 and \$1.0 which is a 70% to 60% decrease. So I really hope you’re right! 🙂

2. Great compilation of numbers here… Maybe I should run the numbers for my portfolio and see what happens.
Thanks for sharing.
DGJ

1. Hi DGJ,

Reviewing the growth numbers was interesting, especially in seeing how I’m pulling the average growth rate down with my stock choices. The higher yields I favor will be slower growth so that’s to be expected but it’s useful to see the numbers visually.

Best wishes,
-DL

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