A dividend history is the list of what a company or fund has paid over the years. It will not tell you what comes next, but it shows how reliable the payment has been and how fast it has grown, and both matter more than the current yield.
Four things to look at
- Consistency. Has it paid every period without gaps? A single skipped or cut payment is worth understanding.
- Direction. Is the payment per share rising, flat or falling over five to ten years?
- Growth rate. How fast has it grown per year, and is that pace steady or erratic?
- Special dividends. One-off payments distort the picture. Separate them from the regular dividend.
Calculating the growth rate
The compound annual growth rate (CAGR) smooths out year-to-year noise. Take the regular annual dividend per share at the start and end of the period.
Made-up example: a dividend of $1.00 five years ago and $1.46 today. The ratio is 1.46, and the fifth root of 1.46 is about 1.079, so the dividend grew roughly 8% a year.
In a spreadsheet: =(end/start)^(1/years)-1.
Warning signs before a cut
- A payout ratio near or above 100%. The company pays out as much as, or more than, it earns. For some businesses, such as real estate trusts, a different measure of cash flow is more meaningful, so compare like with like.
- Falling earnings or cash flow for several periods in a row.
- A yield that is far above its peers. A price drop pushes the yield up, and the market is sometimes pricing in a cut.
- Rising debt while the dividend is held flat or raised.
- Management language shifting from "committed" to "reviewing".
What a dividend history cannot tell you
A long record of increases is reassuring, but companies with long records have cut too. Use the history to ask better questions, not to predict. Spreading income across many holdings reduces the damage of any single cut.
Keep your own record
Your own payment history, in your own accounts, is what your income is actually built from. Nimblewit's income tab shows what you were paid by month and by holding, alongside your yield on cost, so you can see whether your income is growing.