Ten FTSE 350 stocks for dividend growth investors

Wednesday, May 13 2015 by
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Ten FTSE 350 stocks for dividend growth investors

The late American investor Philip Fisher once said that regularity and dependability are the most important but least discussed aspects of dividends. He reckoned that high yield was actually less important than companies with consistent, progressive dividend policies. And he wasn't the only one. A long history of research shows that progressive dividend growth is not only a signal of confidence but it can also produce some of the best long-term returns.

Fisher was famed as a growth stock investor who influenced the thinking of Warren Buffett. In his book Common Stocks and Uncommon Profits, he wrote: “The managements whose dividend policies win the widest approval among discerning investors are those who hold that a dividend should be raised with the greatest caution and only when there is great probability that it can be maintained."

Fear of dividend cuts

Fisher published his book in 1958, shortly after an influential research paper into dividends was produced by Harvard finance professor John Lintner. Lintner's study found that many company executives believe the market puts a premium on dividend stability and gradual growth. They fear the ramifications of cutting dividends - so they only raise payouts when they're sure that future earnings can support them.

Fast-forward nearly 50 years and research by US fund managers Rob Arnott and Cliff Asness arrived at similar conclusions. They studied whether companies that reinvest cash and pay low dividends eventually generate the strongest earnings growth, as many investors assume. But their research found the opposite. It drew a link between proportionately high dividends and high earnings growth. One of their proposed reasons for this echoed Lintner's earlier observation that management teams generally only hike payouts when they're optimistic about the future.

Screening for dividend growth

At Stockopedia we track a long-term dividend growth strategy called Dividend Achievers. It's loosely based on the Nasdaq operated Dividend Achievers Index. Over the past year it has generated an 18.8% return (before dividends). To focus on FTSE 350, we duplicated that screen with the following rules:

  • FTSE 350 companies with dividends that are forecast to grow next year.
  • Dividend growth streak of more than 4 years.
  • Earnings that have grown by more than 10% compounded annually over the past 5 years.

We included the Quality Rank, with scores and ranks every company in the market using measures of profitability, financial strength and low risk -- from zero (low quality) to 100 (high quality).…

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Disclaimer:  

As per our Terms of Use, Stockopedia is a financial news & data site, discussion forum and content aggregator. Our site should be used for educational & informational purposes only. We do not provide investment advice, recommendations or views as to whether an investment or strategy is suited to the investment needs of a specific individual. You should make your own decisions and seek independent professional advice before doing so. Remember: Shares can go down as well as up. Past performance is not a guide to future performance & investors may not get back the amount invested. ?>


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Aberdeen Asset Management PLC is a United Kingdom-based asset manager. The Company operates through asset management for reporting and control purposes. The Company is managed as a single asset management business, with multiple investment strategies of equities, fixed income and property, complemented by a solutions business, which provides multi asset, alternatives and quantitative investment capabilities. These strategies are managed across a range of products, distribution channels and geographic regions. The Company holds investments in seed capital investments, investments in certain Aberdeen-managed funds to hedge deferred fund awards and other investments. The Company operates in approximately 20 countries. Its operations span across Asia Pacific, Australia, the United Kingdom, the United States, the Middle East and Europe, among others. more »

LSE Price
317.6p
Change
 
Mkt Cap (£m)
n/a
P/E (fwd)
n/a
Yield (fwd)
n/a

Bellway p.l.c is a holding company of the Bellway Group of companies. The Company is engaged in the building and selling of homes, ranging from one-bedroom apartments up to five-bedroom family homes, as well as providing social housing-to-housing associations. It focuses on providing traditional family housing outside of London and apartments within the London boroughs, in zone 2 and beyond. It operates in 19 trading divisions in England, Scotland and Wales: Durham, East Midlands, Essex, Kent, Manchester, North East, North London, North West, Northern Home Counties, Scotland, South London, South Midlands, South West, Thames Gateway, Thames Valley, Wales, Wessex, West Midlands and Yorkshire. It also offers second-hand homes of various types, such as detached, apartment, terraced, semi-detached, town house, bungalow and penthouse. It also offers various additions covering kitchens, electrical, fire surround and fire, ceramic tiling, flooring, bathrooms and gardens, among others. more »

LSE Price
2810p
Change
-1.4%
Mkt Cap (£m)
3,510
P/E (fwd)
6.5
Yield (fwd)
5.4

Imperial Brands PLC, formerly Imperial Tobacco Group PLC, is a fast-moving consumer goods company. The Company offers a range of cigarettes, fine cut and smokeless tobaccos, papers and cigars. The Company's segments include Growth Markets, USA, Returns Markets North, Returns Markets South and Logistics. The Growth Markets segment includes Iraq, Norway, Russia, Saudi Arabia and Taiwan, and also includes Premium Cigar and Fontem Ventures. The Returns Markets North segment includes Australia, Belgium, Germany, the Netherlands, Poland and the United Kingdom. The Returns Markets South segment includes France, Spain and its African markets, including Algeria, Ivory Coast and Morocco. Its businesses include Tobacco and Logistics. The Tobacco business comprises the manufacture, marketing and sale of tobacco and tobacco-related products. The Logistics business comprises the distribution of tobacco products for tobacco product manufacturers. more »

LSE Price
2081.5p
Change
-1.4%
Mkt Cap (£m)
20,148
P/E (fwd)
7.4
Yield (fwd)
10.3



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1 Comment on this Article show/hide all

UK Value Investor 15th May '15 1 of 1

Thanks for the list Ben. I always find it fascinating that a few differences in selection criteria can throw up a completely different set of stocks. More than half of that list are companies that I haven't really looked at at all for one reason or another.

Blog: UK Value Investor
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