It’s raise time (again) for subscribers of The Palm Beach Letter (PBL). Three of PBL’s Performance Portfolio stocks just received substantial dividend hikes:
Our “Bible Belt” community bank is raising its quarterly dividend by 13%. The company will now pay us 8.5 cents per share every quarter, starting later this month.
Meanwhile, our health insurer is boosting its quarterly dividend by a fat 43%. We’ll now earn 62.5 cents every quarter, with our first boosted payment coming in March.
And our shareholder-friendly tech stalwart will increase its quarterly dividend by 12% to 7 cents per share starting with our next payment this April.
Regular Daily readers know our favorite dividend metric is growth (not dividend yield). Here’s what PBL Chief Analyst Grant Wasylik said about it in the August 2014 issue of the Palm Beach Letter:
When it comes to long term overall returns…dividend growth trumps dividend yield.
The graph below illustrates this point. Focus on the left side of the graph—the highest cohort of dividend growers—over the 25-year period from 1986-2011.
You’ll notice the top 20% of dividend growers outperformed the top 20% of dividend yielders by 7.5% per year.
Let’s translate this into dollars…
If you put $10,000 into the top dividend yielders in 1986 and let it grow for 25 years, you’d have $212,305. Now, if you chose the dividend growers instead, you’d be sitting on a cash mound of $1,058,464. That’s a difference of $846,159!
Dividend growth wins out across all five quintiles. Dividend growers returned an average 14.1% over 25 years. Dividend yielders returned only 12.7% per year.
Bottom line: Companies that consistently raise their dividends outperform all other stocks over time.
And that’s why the Performance Portfolio is flush with shareholder friendly companies that raise dividends like clockwork.
Palm Beach Letter subscribers can click here to learn more about these three latest dividend raises.