Edited: Dividend Growth Rates

I have collected real, annualized 5, 10, 15, 20, 25, 30, 40, 50, 60 and 100 year dividend growth rates of the S&P500. Dividend growth has been more volatile than I expected.

5-Year Growth Rates

The 5-year dividend growth rate exceeded 12% per year in 1885, 1930 and 1931. The 5-year dividend growth rate fell below (minus) -10% per year in 1922, 1935 and 1936.

10-Year Growth Rates

The 10-year dividend growth rate ranged from (minus) -6.3% per year in 1921 to +8.6% per year in 1931.

In the modern era, beginning in 1950, the 10-year dividend growth rate ranged from (minus) -2.6% per year in 1976 to +6.6% per year in 1957. The 10-year dividend growth rate has been positive 44 times and negative 11 times (1974-1984).

15-Year Growth Rates

The 15-year dividend growth rate ranged from (minus) -3.4% per year in 1947 to +4.9% per year in 1962.

20-Year Growth Rates

The 20-year dividend growth rate ranged from (minus) -1.9% per year in 1921 and 1922 to +5.0% per year in 1967.

In the modern era, beginning in 1950, the 20-year dividend growth rate ranged from (minus) -0.9% per year in 1947 and 1984 to +5.0% per year in 1967. The 20-year dividend growth rate has been positive 46 times and negative 9 times (1950-1952 and 1984-1989).

25-Year Growth Rates

The 25-year dividend growth rate ranged from (minus) -1.5% per year in 1936 to +3.7% per year in 1968 and 1969.

30-Year Growth Rates

The 30-year dividend growth rate ranged from (minus) -1.3% per year in 1947 to +3.1% per year in 1966.

In the modern era, beginning in 1950, the 30-year dividend growth rate ranged from +0.1% per year in 1996 to +3.1% per year in 1966. The 30-year dividend growth rate has been positive 55 times and negative zero times.

40-Year Growth Rates

The 40-year dividend growth rate ranged from (minus) -0.9% per year in 1948 to +2.4% per year in 1965 and 1966.

50-Year Growth Rates

The 50-year dividend growth rate ranged from (minus) -0.2% per year in 1935 to +2.3% per year in 1970.

60-Year Growth Rates

The 60-year dividend growth rate ranged from (minus) -0.0% [actually, -0.028%] per year in 1945 to +1.8% per year in 1931.

100-Year Growth Rates

The sequences were from 1971-2004, using dividend amounts from the trailing (preceding) 60 years.

The 100-year dividend growth rate ranged from +0.7% per year to +1.3% per year.

Observations and Comments

Dividend growth has been more volatile than I expected. In the modern era, the ten-year real, annualized dividend growth rate has ranged from (minus) -2.6% per year +6.6% per year. The 20-year dividend growth rate has ranged from (minus) -0.9% per year to +5.0% per year. The 30-year dividend growth rate has ranged from +0.1% per year to +3.1% per year.

Even in the modern era, it takes more than 20 years before the real, annualized dividend growth rate is consistently positive.

Absent one factor, we would not be able to rely on dividend growth to overcome a prolonged plateau at high valuations (P/E10 above 20). It is the dividend payout ratio.

Today’s dividend payout ratios are low. This does not mean that dividends must grow faster than inflation. It means that dividends can grow faster than inflation. I expect dividends to keep up with inflation as a minimum.

A prolonged earnings slump could drag down dividend growth. History tells us that prices would be hit much harder.

Have fun.

John Walter Russell
December 25, 2006