That brings me to the subject of this brief blog post today. On this Halloween, I can say that my dividend growth portfolio has been delivering all treats and no tricks in recent years. Without further ado, let's get into it.
The Portfolio Is Generating Consistent Dividend Growth
The last time that my portfolio experienced a dividend cut was when I still owned Medical Properties Trust (MPW) in August 2023. American Tower cut its quarterly dividend per share from $1.70 to $1.62 in March 2024. However, on a calendar year basis, the REIT has paid out more dividends each year for 14 consecutive years.
Over my eight years of investing, I have found that the keys to minimizing dividend cuts are as follows:
1. Own companies with track records of generating consistent earnings growth (growing earnings in at least eight or nine out of the past 10 years). Look for forward-looking fundamentals that are likely to translate into continued earnings growth as well. This makes it much easier to hand out payout hikes in the future.
2. Own businesses with payout ratios that are manageable for their respective industries. This provides a buffer for dividends to be maintained in temporary downturns.
3. Own companies with phenomenal balance sheets. At least investment-grade (BBB- or higher). The higher the credit rating, the lower the risk of dividend cuts. Approximately 15% of S&P 500 companies have at least an A- credit rating. Yet, they have accounted for less than 3% of the dividend cuts in recent years.
Concluding Thoughts:
There we have it. In my circumstances, following a few general rules has helped me to greatly reduce the dividend cuts in my portfolio in recent years.
Discussion:
When was the last time your portfolio faced a dividend cut?
I appreciate your readership and look forward to your comments below!
