Why Analytical Experience Matters

Risky industrial cyclicals and recovering banks were the theme behind Bloomberg’s Dividend Tip Sheet, released June 18. We applaud the news outlet’s efforts to put together such a list, but a quick look speaks to the importance of focusing on sustained dividend growth – not just growth alone. A number of these firms will likely fall short of their dividend growth targets in coming years, and some—namely the airlines—will likely have to retract dividend payments within the next decade or so.

Income investors have the dual need of income and growth, and this list is lacking in the former. Most constituents on this list yield less than 2%, and out of the four that yield greater than 2% (on a trailing 12-month basis), Williams Cos (WMB) may be the only firm worthy of valuable dividend growth capital. Williams Cos is also included in the list of ‘Stocks with High VBI Ratings and Strong Dividend Growth Prospects.’ Ford (F) is included in the Best Ideas portfolio, but we like shares of the automaker more because they are mispriced than because shares pay a dividend. MasterCard (MA) is an honorable mention thanks to its favorable industry structure, but it will be a while before its yield becomes a meaningful income vehicle.

Among the many values of a service such as Valuentum is that it can help you sort through lists like this – as they seem to pop up just about everywhere. Without further delay, the table below ranks S&P 500 companies by Bloomberg’s three-year projected dividend growth expectations.