Dividend aristocrats
“The strongest long-term performance often comes from those firms that have the best long-term dividend growth record, rather than being the highest-yielding stock. Regular dividend growers can provide the dream combination of higher dividends and a higher share price as the increased distribution will over time drag the share price higher through sheer force. A 1p per share dividend on a 100p share price may not catch the eye, but if that dividend reaches 10p in a decade’s time it almost certainly will.
“The ravages of the pandemic and the recession have taken their toll on the ranks of FTSE 100 firms that can point to a ten-year dividend growth track record. One year ago, 24 firms were on this list. That number has since dwindled to 15 even as National Grid and United Utilities joined this elite grouping in 2021.
“Hikma Pharmaceuticals is working on a nine-year dividend growth streak and will therefore be looking to rack up a tenth and join this list in calendar 2022.
“Even allowing for the potential changes and deletions to the list of dividend-growers over time, those that managed to maintain their proud runs in 2020 have been tremendous long-term investments.
“The average capital gain from the 15 ten-year dividend growers is 681% and the average total return is 863%. Both easily beat the FTSE 100, at 31% and 92% respectively.”
Total return | Dividend CAGR* | Forecast dividend growth** | ||
2011-2021 | 2011-20 | 2021 E | 2022 E | |
Ashtead | 4,937.9% | 29.3% | 13.9% | 12.5% |
Intermediate Capital | 1,403.0% | 12.0% | 12.5% | 14.3% |
London Stock Exchange | 1,084.4% | 11.9% | 18.7% | 15.7% |
Scottish Mortgage | 1,039.9% | 3.6% | 3.8% | 4.2% |
Spirax-Sarco Engineering | 952.4% | 10.6% | 13.6% | 6.0% |
Halma | 921.8% | 6.8% | 7.6% | 10.5% |
Croda | 508.4% | 10.0% | 16.5% | 5.7% |
RELX | 480.6% | 8.7% | 4.3% | 8.2% |
DCC | 398.1% | 10.2% | 7.0% | 5.8% |
Hargreaves Lansdown | 296.9% | 17.3% | (12.9%) | 9.1% |
Sage | 267.0% | 8.3% | 1.7% | 2.6% |
Diageo | 263.4% | 6.3% | 3.8% | 3.4% |
United Utilities | 179.2% | 3.7% | 1.2% | 2.3% |
National Grid | 161.6% | 3.1% | 1.7% | 2.0% |
British American Tobacco | 54.6% | 6.6% | 0.6% | 5.5% |
AVERAGE | 863.3% | 9.9% | ||
FTSE 100 | 91.8% | 5.0% | 36.2% | 1.1% |
Source: Refinitiv data, Company accounts. *Compound annual growth rate. **Source: Marketscreener, consensus analysts’ forecasts
“Dividend growth is so powerful because it almost inevitably drags a share price higher.
“The average dividend yield for the 15 ten-year raisers is forecast to be 2.4% in 2021, below the 4.1% average across the FTSE 100. But their below-average yields have hardly proved a barrier to excellent total returns over the subsequent ten years.
“That is at least partly because, the dividend yield available on the September 2011 share price using forecast 2021 dividends is 9.9% – and if anyone offered an investor a guaranteed 9.9% dividend yield they would probably snap your hand off, so that shows how a rising dividend can lift a share price, boosting income and capital gains for a powerful total return.”
2021 yield on Sept 2011 share price | 2011 yield on Sept 2011 share price | |
Ashtead | 29.7% | 2.5% |
British American Tobacco | 7.7% | 4.5% |
Croda | 4.7% | 2.8% |
DCC | 10.1% | 4.0% |
Diageo | 5.7% | 3.3% |
Halma | 5.1% | 2.8% |
Hargreaves Lansdown | 10.9% | 2.8% |
Intermediate Capital | 24.6% | 8.3% |
London Stock Exchange | 9.3% | 3.3% |
National Grid | 7.9% | 6.3% |
RELX | 9.5% | 4.4% |
Sage | 6.6% | 2.8% |
Scottish Mortgage | 2.5% | 1.7% |
Spirax-Sarco Engineering | 6.4% | 2.3% |
United Utilities | 7.2% | 5.0% |
AVERAGE | 9.9% | 3.8% |