10-year dividend heroes
“History suggests that it is not the highest-yielding stocks which prove to be the best long-term investments anyway (although the past is by no means a guide to the future).
“Often defending a high yield can be a burden for a firm, as it sucks cash away from vital investment in the underlying business, or can be a sign that the company is in trouble and investors are demanding such a high yield to compensate themselves for the (perceived) risks associated with owning the equity.
“The strongest long-term performance often comes from those firms that have the best long-term dividend growth record, as they provide the dream combination of higher dividends and a higher share price – the increased distribution will over time drag the share price higher through sheer force. A 1p per share dividend on a 100p share price may not catch the eye, but if that dividend reaches 10p in a decade’s time it almost certainly will.
“The ravages of the pandemic and the recession have taken their toll on the ranks of FTSE 100 firms that can point to a ten-year dividend growth track record. One year ago, 24 firms were on this list. That number has since dwindled to 16 even as National Grid, United Utilities and Dechra Pharmaceuticals joined this elite grouping in 2021, the last-named by dint of its promotion to the index in December.
“Hikma Pharmaceuticals is working on a nine-year dividend growth streak and will therefore be looking to rack up a tenth and join this list in calendar 2022.
“Even allowing for the potential changes and deletions to the list of dividend-growers over time, those that managed to maintain their proud runs in 2020 and 2021 have been tremendous long-term investments (although in many cases the final dividend payments for 2021 will be declared in calendar 2022).
“The average capital gain from the sixteen ten-year dividend growers is 666% and the average total return is 831%. Both easily beat the FTSE 100, at 30% and 90% respectively.
“In fact, fifteen of the sixteen firms to have increased their dividend in each of the last 10 years have outperformed the FTSE 100 in capital terms, with British American Tobacco the sole exception. In total return terms, fifteen have done better than the FTSE 100 index, with BAT again the exception that proves the rule.”
| Total return | Dividend CAGR* | Forecast dividend growth** | ||
| 2011-2021 | 2011-20 | 2021 E | 2022 E | |
| Ashtead | 3784.7% | 29.3% | 13.9% | 12.5% |
| Intermediate Capital | 1781.5% | 12.0% | 12.5% | 14.3% |
| Dechra Pharmaceuticals | 1140.8% | 12.6% | 16.0% | 10.6% |
| Scottish Mortgage | 1085.0% | 3.6% | 3.8% | 4.2% |
| Spirax-Sarco | 984.1% | 10.6% | 13.6% | 6.0% |
| Halma | 911.0% | 6.8% | 7.6% | 10.5% |
| London Stock Exchange | 871.1% | 11.9% | 18.7% | 15.7% |
| Croda | 588.3% | 10.0% | 16.5% | 5.7% |
| RELX | 504.1% | 8.7% | 4.3% | 8.2% |
| DCC | 362.1% | 10.2% | 7.0% | 5.8% |
| Hargreaves Lansdown | 295.4% | 17.3% | (12.9%) | 9.1% |
| Diageo | 275.5% | 6.3% | 3.8% | 3.4% |
| Sage | 263.4% | 8.3% | 1.7% | 2.6% |
| National Grid | 212.5% | 3.1% | 1.7% | 2.0% |
| United Utilities | 189.4% | 3.7% | 1.2% | 2.3% |
| British American Tobacco | 47.1% | 6.6% | 0.6% | 5.5% |
| AVERAGE | 831.0% | 10.1% | ||
| FTSE 100 | 90.0% | 4.6% | ||
Source: Refinitiv data, Company accounts. *Compound annual growth rate. **Source: Marketscreener, consensus analysts’ forecasts
