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Seven fast-growing high yields

Algy Hall unearths seven new Dividend Over Achievers - shares yielding higher than the market average with superior long-term dividend growth records.
June 30, 2014

Not for the first time recently, I’ve found myself in a quandary about how to assess one of my screen’s performances. The screen in question is my Dividend Over Achievers screen. It is based on the concept of a Dividend Achievers index, which is popular in the US and consists of all stocks (all FTSE All-Share stocks in the case of my screen) that have increased their dividend payouts in each of the last ten years.

As far as performance goes, the issue is that while the cumulative total return (share price performance with dividends reinvested) produced from switching portfolio holdings when I annually re-run the screen has done worse than the FTSE All Share index (and that’s even ignoring dealing costs and spreads), buying and holding the 2012 and 2013 portfolios has produced outperformance in both cases (see graph). The performance of the 2012 screen is particularly interesting as the shares underperformed the index during the first year but have since made up the ground and are outdoing the index, albeit by an admittedly modest 0.5 per cent (37.8 per cent versus 37.3 per cent). The 2013 screen produce a 15 per cent total return compared with 9.1 per cent from the index, while the cumulative performance has been 34.1 per cent versus 37.3 per cent.

The question for me is what integrity there is to considering the performance of this screen on a buy-and-hold basis - or if by doing so am I effectively massaging its performance figures by focusing on what looks best? I would argue that a buy-and-hold analysis of this screen actually probably makes most sense. After all, the screen looks at a stock’s long-term track record in the hope that it will be continued. What’s more, a track record of dividend increases is essentially a measure of quality, and focusing on buying quality stocks is a strategy that is generally regarded as a long term one.

It’s probably dividend “underachievement” – ie. not growing a dividend for a year – that should be the most noteworthy reason for eliminating a stock from this screen. Unfortunately, I have not been able to build this into my performance assessment to see what effect it has. For the time being, I think it’s best to simply cover all bases and continue to monitor the long-term performance of each annual screen and the cumulative performance from switching.

As well as looking for stocks that have increased their dividend payment for each of the last ten years, the Dividend Over Achievers screen looks for:

■ A yield higher than the median average for all dividend paying shares

A higher than the median compound average dividend growth rate over:

■ 10 years

■ 5 years

■ 1 year

Higher than median average forecast EPS growth for:

■ Current financial year (next period to be reported on)

■ Following financial year

Unfortunately only one stock this year passed all of the over achiever tests – that was Domino’s Pizza. I’ve provided a write up of this stock below along with the six stocks that boast a higher than median average yield and only failed one of the other screen tests. In addition, a list of all the other Dividend Over Achievers, ordered by yield, is published in the table below.