Dividend Stability

[jbocker]

Dividend Stability.
Its been a cold wet day in Perth and spent most of it reading up on various things. One thing that I read and are rather interested in is Dividend Stability. It is the likelihood of a company will continue to pay its dividends, and could be of value maybe as much its yield in weak market times. The higher the number the better, the score in the example given was 99.3. Not sure it were a %.
Anyone heard of it, and is it quoted in any form of analysis that anyone uses?

 

[DeepState]

Re: Dividend Stability.

Dividend Stability.
Its been a cold wet day in Perth and spent most of it reading up on various things. One thing that I read and are rather interested in is Dividend Stability. It is the likelihood of a company will continue to pay its dividends, and could be of value maybe as much its yield in weak market times. The higher the number the better, the score in the example given was 99.3. Not sure it were a %.
Anyone heard of it, and is it quoted in any form of analysis that anyone uses?

It is one measure of earnings stability and, concurrently, low volatility. This type of stock has, as a group in aggregate, outperformed the market in terms of risk-adjusted outcome in just about every market globally since the dawn of market time. There are a range of drivers related to market micro structure, agency misalignment, framing in relative references...

Check out "Minimum Variance Portfolio" in your trusty search engine and go from there. EDHEC-Risk is a good source of research too.

Dividend stability forms part of the investment processes of some fund managers in producing these types of portfolios. The field is large and growing. There is concern that such stocks are currently overpriced as stocks with stable earnings tend of have reasonable yields and the search for yield effect has pushed their prices out of line with fair value.

The specific measure you are talking about is probably just one person's view of how to measure it. It would be a score or percentile measure of stability within some universe of stocks, determined in some way that probably looks at volatility of past dividends as part of some wider set of measures. It would not be a return estimate, unless you were inadvertently hooked up with some dodgy crap. In any case, it brought you here.

 

[jbocker]

Thanks DeepState
Appreciate your comments. No not dealing with a dodgy. Read about in a book co written by Zac Zacharia - a lecturer in share investments (S.A. TAFE).

 

[luutzu]

Thanks DeepState
Appreciate your comments. No not dealing with a dodgy. Read about in a book co written by Zac Zacharia - a lecturer in share investments (S.A. TAFE).

In general, most companies paying dividends will have policies that allow them to keep it fairly "stable". Like paying 60-90% of net profit. That, together with dividend reinvestment plans, will allow management to keep the payout fairly as expected by the market: rise by a bit, and rise in a straight line.

You ought to look at what make dividends a sensible capital return or market-cheering effort. Like earnings, return on equity, return on capital... Ideally, you'd want a company to only pay you a dividend if there's no other opportunities they can find to use that capital profitably... etc. etc.

 

[Tooth Faerie]

I've been casually browsing through the various companies, looking at divident yield and stability. In regards to divident stability, what number would be considered safe?

For example, CBA's stability is 99%. Would I be safe to say that 99% is a good indication of stability?

What about a companu with a dividend stability of 92%? Would that be considered not stable?

I apologise if this is too basic of a question.

 

[TPI]

I've been casually browsing through the various companies, looking at divident yield and stability. In regards to divident stability, what number would be considered safe?

For example, CBA's stability is 99%. Would I be safe to say that 99% is a good indication of stability?

What about a companu with a dividend stability of 92%? Would that be considered not stable?

I apologise if this is too basic of a question.

Can you be more specific with an example, which company is it with 92% stability?

 

[Tooth Faerie]

I'm sorry for rehashing a topic that already had an existing thread.

Can you be more specific with an example, which company is it with 92% stability?

I was just wondering in general but looking at MYR, that has a dividend stability of 92%.

 

[TPI]

I'm sorry for rehashing a topic that already had an existing thread.



I was just wondering in general but looking at MYR, that has a dividend stability of 92%.

You just need to look at what the actual historical DPS figures are, eg. for MYR:

2010 DPS 22c
2011 DPS 22.5c
2012 DPS 19c
2013 DPS 18c
2014 DPS 14.5c

So DPS for MYR has been on a declining trend since listing.

The only way you could justify calling it stable in any way is that a dividend was paid every year, but this is not that good if it is decreasing each year!

Personally I would completely ignore these dividend stability figures and make your own assessment by looking at the historical pattern of DPS.

 

[Tooth Faerie]

You just need to look at what the actual historical DPS figures are, eg. for MYR:

2010 DPS 22c
2011 DPS 22.5c
2012 DPS 19c
2013 DPS 18c
2014 DPS 14.5c

So DPS for MYR has been on a declining trend since listing.

The only way you could justify calling it stable in any way is that a dividend was paid every year, but this is not that good if it is decreasing each year!

Personally I would completely ignore these dividend stability figures and make your own assessment by looking at the historical pattern of DPS.

Thanks for the reply TPI.

That does seem a much more logical and simpler way of looking at things.

Looking at CBA, it has be increasing dividends since 2011.

 

[Julia]

Thanks for the reply TPI.

That does seem a much more logical and simpler way of looking at things.

Looking at CBA, it has be increasing dividends since 2011.

That's why some of us will make increasing DPS one of a criteria of stock selection.

 

[Tooth Faerie]

That's why some of us will make increasing DPS one of a criteria of stock selection.

Thanks Julia, I definitely leaning towards this type of thinking lately. I've only just started reading about shares and my ability to speculate on shares has been horrible.

The ones that I've bought in businesses I know and pay dividends seem much safer for someone with less knowledge like myself.

 

[PZ.]

Bump

Banks cutting dividends a cruel prospect for retirees

Plato Investments managing director Don Hamson has urged the big four banks to keep paying dividends to investors, warning that older investors could be "hung out to dry" if the banks cut yields.

With the Australian Prudential Regulation Authority teling banks last week to 'seriously consider' suspending decisions on dividend payments until the full economic toll of the coronavirus outbreak is understood, Dr Hamson said the lenders could use underwritten dividend re-investment plans to offer certain shareholders discounted shares instead of cash payouts.

"This allows the company to completely preserve its capital as well as paying dividends to those who rely on the income to make ends meet," Dr Hamson said.

"Destroying the major income stream of thousands of Australians, many of whom are retirees, will put further strain on the economy, which we believe will fall into a deep recession in the June quarter of 2020."

Retirees with low superannuation balances and no income often rely on dividends to get by and with these payments drying up as companies try to protect capital reserves amid global economic uncertainty. Bank of Queensland became the first bank to defer its dividend at its half-year results last week and several analysts have predicted ANZ, NAB and Westpac will soon follow suit.

Dr Hamson's comments came as home equity consulting firm Household Capital on Tuesday reported a 40 per cent spike in calls last month from "panicked" retirees inquiring about reverse mortgages.

Chief executive of Household Capital Josh Funder said retirees have turned to home equity as the group are faced by sluggish rental yields, crashing superannuation balances as a result of extreme market volatility and insignificant term deposit returns caused by record low interest rates.

Mr Funder said that asset rich but income poor boomers have been left in "financial limbo" with many not qualifying for government assistance.

"Retirees are doing it tough," Mr Funder said. "And the national response has been inadequate to support retirees."

"The government response to JobSeekers and JobKeepers has been very good, we need to applaud the government for that response. But that response has missed retirees, they have not increased the pension or provided any form of enduring stimulus to help retirees get through to manage their health and their funding."


https://www.smh.com.au/business/ban...el-prospect-for-retirees-20200414-p54jqc.html