We have been speaking and writing about investing in companies that increase their dividend payments for many years now. Dividend payments as you know are paid in cash and can either be reinvested, accumulated as cash in your account or paid out to you as part of your periodic distributions/withdrawals. They are quite valuable during bear markets like the one we are in now.
What we look for are companies that grow the dividend annually well in excess of inflation. This signals that management is confident enough in the near-term outlook to raise the dividend aggressively, that the company’s balance sheet is strong enough & that management is focused on providing a rising level of income to shareholders. Click the link to see our buy list of companies that pay a dividend, how much the dividend has increased annually during 2018-2022 and what the dividend growth forecast is for the next 5 years. As you can see 18 of 31 buy list companies forecast 8% or better annual increases. For information purposes Conry Asset Management currently has 40 companies on its buy list, with nearly 80% paying a dividend, the balance being growth companies that reinvest their profit back into the company.
While an 8% increase doesn’t sound fabulous in today’s high inflation environment, we do have confidence in the Federal Reserve’s ability to get inflation under control by reaching its 2% target in 2024.
As the macro-economic environment continues to look murky for this year, we do want to provide some optimism about periods of economic weakness; these periods are normal, over the long run expected and in the past have always ended with the start of a new upcycle. But in many instances, they come as a surprise and of course we don’t know how long they will last. Lastly, at least from a historical perspective, stocks typically start their recovery well before the recession ends.
We hope this has been an interesting read. If you have any questions, please email or call us.
Happy New Year!