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Subscribe to RSS feed A Simple Trend Analysis of Dividends

By evankoh posted on 6 Jul 2015  -  8,715 views

One factor that affects whether I purchase a stock or not is how much dividends it gave out last year, and for how many years it has been doing so. This is because when I purchase stocks, I am hoping mainly to benefit from dividend gains rather than capital gains.

One obvious question would be: how much can we rely on the dividends that was paid out in the past to predict future dividends?

One might suggest going into the fundamentals of the company and estimate how likely the company can continue doing so. I personally find it to be a complex and qualitative task, therefore, the statistician in me decided to answer a simpler question with an easy-to-compute solution:

Historically, what is the percentage where the absolute amount of dividends paid out by a particular company (listed in SGX) this year is greater or equal to the previous year's?

Below are the numbers that I have computed. It is comforting to know that close to 60% of dividends paid out this year is greater or equal to last year. In fact, it was only in 2008 and 2009 where it fell below 50%.

This means that if you randomly purchase a stock with dividends today, there is a 60% chance that next year, that you will be able to receive dividends greater or equal to this year. You can find the current dividend yields of companies listed in SGX here.

Overall - 59.89% (3079 / 5141)
2003 - 62.91% (95 / 151)
2004 - 74.65% (159 / 213)
2005 - 66.67% (224 / 336)
2006 - 64.73% (268 / 414)
2007 - 64.67% (302 / 467)
2008 - 46.83% (236 / 504)
2009 - 32.69% (169 / 517)
2010 - 70.52% (342 / 485)
2011 - 66.80% (330 / 494)
2012 - 56.79% (301 / 530)
2013 - 59.54% (312 / 524)
2014 - 67.39% (341 / 506)

Maybe a 60% probability is not good enough for you, or maybe you are not as greedy as I am and would not mind even if the payout is reduced as long as there are some dividends.

So the next question is, historically, what is the percentage where the absolute amount of dividends paid out by a particular company (listed in SGX) this year is greater or equal to 50% of previous year?

Almost every year (except 2008 and 2009), you can expect a payout of at least 50% of last year's dividends, 80% of the time.

Overall - 77.71% (3995 / 5141)
2003 - 78.15% (118 / 151)
2004 - 85.45% (182 / 213)
2005 - 80.06% (269 / 336)
2006 - 79.47% (329 / 414)
2007 - 80.51% (376 / 467)
2008 - 65.28% (329 / 504)
2009 - 59.19% (306 / 517)
2010 - 83.30% (404 / 485)
2011 - 85.63% (423 / 494)
2012 - 77.74% (412 / 530)
2013 - 79.39% (416 / 524)
2014 - 85.18% (431 / 506)

At this point, you might have a few questions in mind;
"Are these numbers different if we only consider blue chip companies?"

"Does dividend yield affect the numbers above (i.e. Won't it be easy for low yield companies to grow their dividends)?"

"How often do companies that start giving out dividends stop?"

In my upcoming articles, I will dig deeper into the numbers and answer the questions above. Feel free to leave a comment if you have any questions that you would like answered.


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