Dividend dictionary



Dividend growth rate
The dividend growth rate says something about how much a company raises it's dividends every year. For instance, if a company had a dividend of $1 five years ago and now has a dividend of $2, it means that 5 year dividend growth rate was 15%.
Yield
The dividend yield shows what percentage a company pays out in the form of dividends relative to the market value per share. For instance, if a company pays out a $2 dividend and has a price of $100, the dividend yield would be 2%.
Dividend payback period
The dividend payback period shows how many years it will take to recoup your investment in a dividend stock counting dividends received. For instace, if you buy a stock with a $3 dividend for $100 that grows its dividends at 10% every year, it would take you 16 years to get your investment back by receivng dividends only. Note that this calculation does NOT take into consideration any gains from the sale of a stock.
Ex-dividend date
You need to buy a stock before the ex-dividend date, in order to receive the next dividend payment from the company.
Pay date
The dividend pay date is the date on which a company pays a dividend to the shareholders that are on record.
Record date
The dividend record date is the date on which a company finishes the list of investors who are regarded as shareholders on record. These shareholders on record will receive the firm's upcoming dividend payment.
Payout ratio
The payout ratio shows you how many percent of the earnings are being paid out as dividends.
Chowder rule
The Chowder rule is used to identify dividend growth stocks with strong total return potential.

The overall purpose is to get a compund annual growth rate of over 8%. For stocks yielding more than 3%, a 50% margin of safety is used. This is to make sure that there is room for unforseen problems and for this reason it's a good idea to invest in stocks with an expected dividend compound annual growth rate of 12% in order to get the 50% margin of safety.

If the stock in question is fast growing and therefore has a low yield below 3%, the expected dividend compound annual growth rate has to increase from 12% to 15%. The margin of safety is hereby increased to 87.5% to take higher risk into account and to anticipate a slower growth in the future. For these reasons a higher margin of safety has to be required.

One exception are utility stocks that normally have slow growth rates and high yields. There companies are regulated and have almost monopoly like dominance in their regions. For these reasons the margin of safety for these stocks is no longer needed to satisfy the rule and therefore the expected total return of 8% is enough to satisfy the Chowder rule
Tweed factor
The Tweed model is a method of comparing a stock's dividend yield and dividend growth rate to its P/E ratio. The higher the Tweed Factor is, the better, since it shows the excess of the dividend data over the price level.
Dividend aristocrats
To be named a dividend aristocrat, a company must have increased it's dividends for at least 25 consecutive years.







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Dividend growth stocks with at least 5 years of dividend increases




Disclaimer: Information on this site is only for informational purposes. Always consult a professional advisor before investing.