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3 Reasons to Invest in Stocks with 10+ Year Dividend Growth Streaks Cover.

During the Global Financial Crisis, no Canadian stock with a 10+ year dividend growth streak cut its dividend.

Looking for peace of mind high-quality investments that can weather recessions and continue to pay dividends you can rely on in retirement?

Well, start by investing in companies with at least 10 years of consecutive dividend increases.

Here are 3 reasons to invest in stocks with 10+ year dividend growth streaks…

Reason #1: Long Dividend Streaks = High Quality

“One of the most persuasive tests of high quality is an uninterrupted record of dividend payments going back over many years.”

Benjamin Graham

According to Warren Buffett this quote comes from “the best book about investing ever written”, The Intelligent Investor. It was written by Benjamin Graham, known as the father of value investing.

Hard to find a stronger recommendation than that, so pay attention (wink).

Here’s the full paragraph from Ben Graham on the importance of a long dividend record:

Source: The Intelligent Investor – A Book of Practical Counsel by Benjamin Graham

20 years of uninterrupted dividend payments is what Ben Graham advocates.

My argument is for at least 10 years of uninterrupted dividend GROWTH.

To meet Ben Graham’s requirement a company could pay out the same dividend each year for 20 years. Whereas I want to see 10+ years of consecutive dividend increases.

This focus on dividend growth versus a minimum of maintaining the dividend is more stringent than Mr. Graham’s. I could argue that my strategy focuses even more on high-quality companies.

Bottom Line #1

A long dividend streak is a sign of a high-quality company.

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Reason #2: A 10-Year Dividend Growth Streak Provides Peace of Mind

the real hidden agenda of all investors is to find a way to have a high confidence level when economic times are troublesome.

Source: The Single Best Investment: Creating Wealth with Dividend Growth written by Lowell Miller

I like to see that the company was capable of increasing its dividends in the good times and the bad so that I’m more comfortable relying on that income in the future.

This is sometimes called SWAN investing:

  • S – Sleep
  • W – Well
  • A – At
  • N – Night

In retirement, when you are planning your next trip to that exotic island that had those yummy blue drinks with tiny umbrellas or thinking about how to spoil the grandkids, you don’t want to be worried about your investments.

You want investments that pay reliable dividends so that you can sleep well at night.

Building confidence and creating that peace of mind with your investments starts with looking at the past.

Source: The Single Best Investment: Creating Wealth with Dividend Growth written by Lowell Miller

In other words, how did they do during the last two recessions? Were they able to increase the dividend during these difficult times or at least maintain them?

You never know when the next recession is going to come, but the average length of a business/economic cycle has been about 7 years in Canada and 5 ½ years in the US. 

To get through two business cycles you’d typically need at least 10 years. As a result, I want a company to have increased its dividend every year for at least a decade.

That said, sometimes a decade isn’t long enough. 

Take 2020 for example, the COVID-19 pandemic hits and causes recessions around the world, but the last major recession in North America was 11/12 years before that, with the 2008/2009 global financial crisis. In this example, a 12+ year dividend streak might be more prudent.

Bottom Line #2

Make sure your dividend growth streak is at least 10 years so that it is long enough to have covered the last major recession.

Better even is a streak that covers the past two recessions.

When the next downturn comes it will give you peace of mind knowing that in the last crisis your investments were still able to increase their dividends.

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Reason #3: A Long Dividend Growth Streak Protects Your Income

Seeing how well the dividend income of Canadian stocks with 10+ year dividend growth streaks held up during the global financial crisis is what ultimately convinced me that this was a worthwhile strategy.

2008-2009 Global Financial Crisis & Long Dividend Growth Streaks

At the end of 2007, before the 2008/2009 Global Financial Crisis, there were 24 Canadian stocks with dividend growth streaks of 10+ years.

Of these 24, none cut their dividend during the Global Financial Crisis.

How Canadian Dividend Growth Stocks Survived the Global Financial Crisis Infographic

In fact, had you invested in the 24 Canadian stocks with dividend growth streaks of 10+ years, your dividend income from these investments would have increased each year.

Dividend Income Of Canadian Dividend Growth Stocks During The Global Financial Crisis

Assuming your dividend income from these 24 companies was the same at the start of 2008, dividend income would have:

  • Increased By 9.9% in 2008,
  • Increased By 3.9% in 2009,
  • Increased By 3.7% in 2010, and
  • Increased By 6.5% in 2011
How the Dividend Income of Canadian Dividend Growth Stocks Did During the 2008-2009 Global Financial Crisis

If you want to dig more into this research, read my in-depth article: How The Dividend Income Of Canadian Dividend Growth Stocks Did During The 2008-2009 Global Financial Crisis

It’s important to remember that this was during a time when 57%* of dividend-paying firms across the world either cut (43%*) or eliminated their dividend (14%*) and “the year after 2008’s global market decline, aggregate dividends fell by 20%.”*

*Source: “Global Dividend-Paying Stocks: A Recent History,” A March 2013 DFA study covering 23 developed markets.

By focusing on companies with long dividend growth streaks, most of these dividend cuts/eliminations could have been avoided.

Bottom Line #3

Quality matters and a longer dividend streak is important.

Let’s look at another recession example that is still evolving as I write this.

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COVID-19 Global Pandemic & Long Dividend Growth Streaks

Of the 85 Canadian companies that cut, suspended, or eliminated their dividend from the end of February 2020 to mid-December 2020, only 6 (7%), had a dividend growth streak of 10+ years.

The six companies with 10+ dividend growth streaks that cut or suspended their dividend are shown below.

6 Dividend Cuts or Suspension in 2020

Avoiding 93% of the dividend cuts during a global pandemic is good, but you could have done even better. 

This example is a good illustration of when you’d want to focus on streaks longer than 10 years. In this case 12+ years.

12 years might seem like a random number of years, but it’s not.

Before COVID-19 hit in 2020, the last major North American recession came with the 2008/2009 Global Financial Crisis. This was more than a decade ago. 

You want a dividend streak long enough to have covered the previous recession. Normally 10 years will do it, but in this case, you needed a 12-year streak.

So, had you only invested in Canadian companies with 12+ years of dividend growth you would have only suffered 3 of 85 (3.5%) Canadian COVID-19 dividend cuts.

The three companies with 12+ dividend growth streaks that cut or suspended their dividend are shown below.

3 Dividend Cuts or Suspension in 2020

With a 12+ year dividend growth streak, you could have avoided 96.5% of the dividend cuts, suspensions or eliminations.

Special thanks to Mathieu Litalien & Stocktrades.ca who did a great job tracking all these Canadian dividend cuts, suspensions, and eliminations.

How Many Long Dividend Growth Streak Companies Are There?

You may be thinking, sure this sounds good, but just how many long dividend growth streak companies are there? 

I used the Canadian Dividend All-Star List to answer just this question.

2020 Dividend Activity Of Canadian Stocks With A 10+ Year Dividend Growth Streak

At the beginning of 2020, there were a total of:

  • 45 Canadian stocks with a 10+ year dividend growth streak.

2020 Dividend Increases And Decreases of Canadian Stocks With 10+ Year Dividend Growth Streaks

That means,

  • 6, or 13%, of the 45 Canadian stocks with a 10+ year dividend growth streak cut their dividend.

2020 Dividend Activity Of Canadian Stocks With A 12+ Year Dividend Growth Streak

At the beginning of 2020, there were a total of:

  • 34 Canadian stocks with a 12+ year dividend growth streak.
2020 Dividend Increases And Decreases of Canadian Stocks With 12+ Year Dividend Growth Streaks

That means,

  • 3, or 9%, of the 34 Canadian stocks with a 12+ year dividend growth streak cut their dividend.

So it’s not 100% foolproof, but it does mean that you could have avoided the vast majority of dividend cuts.

A Deeper Look At Dividend Income During The 2020 Pandemic

If you can avoid the vast majority of dividend cuts it gives the rest of your portfolio enough room to make up for it with dividend increases.

For example, you invest in the 34 Canadian stocks with dividend growth streaks of 12+ years at the start of 2020 and each stock pays you the same amount of dividends. By the middle of December 2020:

  • 3 stocks cut their dividend,
  • 28 stocks increase their dividend, and
  • 3 stocks maintain their dividend.

The loss in income from the 3 dividend cuts is made up for by 28 dividend increases from other companies. The end result is that by the middle of December 2020 your overall dividend income has increased by 0.6%.

If you run the same scenario with a 10+ year streak, dividend income would have dropped by 4.0%.

Now the pandemic didn’t end in 2020, so more of these companies could increase or cut their dividends in 2021 and on, but it does showcase the resiliency of dividend growth stocks with long dividend streaks.

Bottom Line #4

Focus on long dividend streaks to recession-proof your portfolio and avoid dividend cuts.

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Where To Find Stocks With Long Dividend Growth Streaks?

Whether it’s 10, 12, 25 or even 50 years of dividend growth, I use 4 dividend lists to screen for companies with long dividend streaks.

Each of these lists contains stock information on companies that have increased their dividend for 5+ years in a row.

  1. Canadian Dividend All-Star List
  2. US Dividend Champions List
  3. UK Dividend Champions List
  4. Eurozone Dividend Champions List

Here’s an example of what the Canadian Dividend All-Star List looks like, with the dividend streaks circled in red.

Source: June 30, 2019, Canadian Dividend All-Star List

I maintain the Canadian Dividend All-Star List which is emailed to my subscribers at the beginning of each month. For free access subscribe below.

Download CDASL

Subscribe to the Dividend Growth Investing & Retirement newsletter and you'll be emailed the download link for the most recent version of the Canadian Dividend All-Star List (CDASL).

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Related article: Canadian Dividend All-Star List: Best Resource to Find High-Quality Canadian Dividend Growth Stocks

Use these links for free spreadsheet downloads of the US Dividend Champions ListUK Dividend Champions List, and Eurozone Dividend Champions List.

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Summary

Looking for peace of mind, high-quality investments that can weather recessions and continue to pay dividends you can rely on in retirement?

Focus on stocks with 10+ year dividend growth streaks for 3 reasons:

Reason #1: Long Dividend Streaks = High Quality

Benjamin Graham said it best: 

“One of the most persuasive tests of high quality is an uninterrupted record of dividend payments going back over many years.”

Reason #2: A 10-Year Dividend Growth Streak Provides Peace of Mind

Make sure your dividend growth streak is at least 10 years so that it is long enough to have covered the last major recession. 

When the next downturn comes it will give you peace of mind knowing that in the last crisis your investments were still able to increase their dividends.

Reason #3: A Long Dividend Growth Streak Protects Your Income

During the Global Financial Crisis, no Canadian stock with a 10+ year dividend growth streak cut its dividend.

Focus on long dividend streaks to recession-proof your portfolio and avoid dividend cuts.

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8 Comments

  1. Very nice informative stuff thanks for sharing your research and knowledge. Bit of an eye opener for a beginner div investor like me.

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