How to Start Investing – Part 4

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In the previous post, we looked at five important metrics for evaluating stocks and promised to look further into some factors for dividend stocks in particular, so here it is! Today we’re looking at dividend history, i.e. how long has a company been paying dividends? How long have they been increasing their dividends? Have they made any changes to their payment schedule, or have they changed currencies?

1. British vs. American Stocks
2. Dividend Aristocrats
3. Dividend Kings
4. How to find out a company’s dividend history
5. Past Performance Warning

British vs. American stocks

There are significant differences between the British and American stockmarkets, namely size being the most important. The US market is simply huge and has so many more companies listed than in little old Britain! One key aspect of this is that there are just far more stocks in the US that have a good history of paying dividends, and increasing them year in, year out.

However, there are several British companies who do have a good history too, it’s just not as long as some of the big American companies. For example, 3M over in the US had (emphasis on HAD being past tense, see further below!) a dividend growth history of over 60 years, whereas Diageo (think Guinness) has a dividend growth history of 37 years – the highest of any British company.

Dividend Aristocrats

Dividend Aristocrats are US companies who have raised their dividends for 25+ years in a row. They have minimum market cap, liquidity rules, and must be listed in the S&P500 to be eligible for the title. They represent an elite group of companies who have achieved a quarter of a century or more of dividend growth and are typically considered safe havens to invest in (although this doesn’t constitute advice, or that they are indeed safe!). There are only 10 British companies who have raised their dividend for 25 years or more, we and we will discover more about them in a future post!

Dividend Kings

Dividend Kings are the ultra-elite of the dividend world, with 50 or more years of dividend growth, however they do not need to be members of the S&P500 or meet other requirements, so they may be much smaller, or indeed regional companies such as California Water Service.

There are no British companies on this list, all are American apart from one – Fortis, a Canadian electric utility with a 50 year dividend growth history. The next non-American company on the list is Medtronic, the Irish healthcare company. It may not necessarily be a bad thing that there aren’t many British companies on the list, as nowadays we can invest in global companies from the comfort of our own home with an account such as Trading212 which offers stocks from several countries and you can invest in several currencies – a boon for international investors. This adds another layer of diversification opportunity – if you can’t find a stock in the UK from a certain industry or sector, you can always look overseas. Do be aware that there will be tax on foreign dividends unless you hold the shares in a SIPP, yes, even in an ISA foreign dividends will be taxed, although typically at a reduced rate e.g. 15% for US stocks instead of 30% due to the UK-US tax double taxation treaty.

How to find out a company’s dividend history

So now we have an idea of longevity in dividend growth, how do we find out the dividend history of a company? This is where the internet is your friend. Using websites such as those listed in part 2 here can help you discover which companies have solid years of history. Dividend Data is probably the most useful for a free service to the UK investor. Another website I didn’t mention in that list was Aktien Finder aka the DividendStocks.Cash website. Again, this is another site that requires a subscription fee to get the majority of data we’d be after, however they do have a reasonable amount of info for free, including a list of the dividend aristocrats in a handy table.

Past Performance Warning

It’s worth always remembering that this website is not to be used as advice and that any infor from other websites about past performance is no guarantee of future performance. There are companies who have dropped out of such as lists as the dividend kings and dividend aristocrats. Here are a couple of well-known companies who dropped out of the Dividend Kings list:

• Aon
• VF Corp
• 3M

Aon, as you may remember used to sponsor the Man U football team about 15 years ago. They are an insurance company who cut their dividend in 2002 due to, amongst other things, rising pension costs – a factor we are all too familiar with in the recent failures of several big British businesses.

VF Corp? Who are they? Well you’ve probably seen Vans trainers and TNF aka The North Face winter coats. VF Corp just cut their dividend in 2023 after excess stock and lower demand put too much pressure on the company.

3M you’ve probably heard of as they make so many household products such as Scotch Tape etc. They very recently slashed their dividend, which is a huge shame as they had a dividend history of over 60 years! But this is why past performance is no guarantee of future performance!

So the moral of the story is, nothing is as safe as houses, always DYOR and perhaps seek the advice of a professional such as an Independent Financial Advisor or someone who has passed one or more of the Certified Financial Planner exams. Seeing a lengthy history of dividend growth on its own is not a reason to invest in a stock any more than seeing an increasing share price every year would be. Food for thought.

In our next and final article in the How to Start Investing series, we will look at the process of buying shares in a stock, using the Trading212 app.

As always, feel free to pop questions or comments below 🙂