Updated on March 10th, 2023 by Bob Ciura
There are many was to measure the quality of a dividend stock. One way is the length of a company’s dividend history. In general, stocks that have raised their dividends for multiple years in a row have demonstrated that they are committed to rewarding investors with steadily rising dividends.
One lesser-known group of dividend growth stocks is the list of Dividend Challengers, which have raised their dividends for 5-9 years in a row.
While 5 years is not the longest history of dividend growth, it does demonstrate a history of returning cash to shareholders with dividends. It also represents a company with a profitable business model, durable competitive advantages, and a positive growth outlook.
With this in mind, we created a downloadable list of 270 Dividend Challengers.
You can download your free copy of the Dividend Challengers list, along with relevant financial metrics like price-to-earnings ratios, dividend yields, and payout ratios, by clicking on the link below:
Investors are likely familiar with the Dividend Aristocrats, a group of 68 stocks in the S&P 500 Index with 25+ consecutive years of dividend increases. Dividend growth investors should also familiarize themselves with the Dividend Challengers, which could be Dividend Aristocrats in the making.
This article will discuss an overview of Dividend Challengers, and why investors should consider quality dividend growth stocks. Additional information regarding dividend stocks in our coverage universe can be found in the Sure Analysis Research Database.
Table of Contents
You can instantly jump to any specific section of the article by clicking on the links below:
- Overview of Dividend Challengers
- Example Of A Dividend Challenger: Danaher Corp. (DHR)
- Final Thoughts
Overview of Dividend Challengers
The requirement to become a Dividend Challenger is simple: 5-9 consecutive years of dividend growth. This is not exactly a high hurdle to clear, but it does separate dividend growth stocks from the companies that have held their dividends steady for many years. This is a subtle, but important, difference.
Companies that do not raise their dividends each year are often unable to do so because the underlying business is struggling.
While there are no proven precursors to a dividend cut, one potential red flag is when a stock freezes its dividend, particularly if that stock had previously held a long track record of hiking its dividend payout each year.
When business conditions deteriorate, companies often see their revenue and earnings-per-share decline. This could happen for a number of reasons, including a recession, escalating competition, or perhaps an unexpected event such as a geopolitical conflict or natural disaster. In any event, a company with falling revenue and earnings-per-share will likely not be able to raise its dividend.
Depending on how things go from there, the company in question might be able to return to dividend growth if its fundamentals improve.
On the other hand, if conditions worsen, the next step could be a dividend cut or suspension. A dividend freeze might be the first step in this process, which is why investors should pay attention if a dividend growth stock goes longer than a year without raising its payout.
Example Of A Dividend Challenger: Danaher Corp. (DHR)
Danaher Corporation is active in the healthcare industry and designs, manufactures and markets professional, medical, industrial, and commercial products and services. Danaher has increased its dividend for 8 consecutive years.
The company operates through three main segments: Life & Bio Sciences (38% of annual revenue – end of 2022), Diagnostics (35% of annual revenue), and Environmental & Applied Solutions (15% of annual revenue). The company made 14 acquisitions in 2021 for a total of $11.0 billion, including the Aldevron acquisition of $9.6 billion.
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On January 24th, 2023, Danaher Corporation released its fourth quarter fiscal 2022 results for the period ending December 31st, 2022. For the quarter the company reported revenue of $8.37 billion which represents a 2.7% increase compared with revenue of $7.58 billion in the same quarter of 2021.
Source: Investor Presentation
Revenue from the Life Sciences segment totaled $1.95 billion, rising 7.9% year-over-year. Revenue from the Diagnostics segment grossed $2.965 billion, increasing 7.5% year-over-year. Revenue from the Environmental & Applied Solutions segment totaled $1.235 billion, up 5.5% year-over-year. Revenues from the Biotechnology segment totaled $2,223 million, down nearly 1% year over year.
Reported quarterly earnings per diluted share equaled $2.87 which represents a 6.5% increase over the comparable 2021 period. For the full year 2022, net earnings were $7.1 billion, or $9.66 per diluted common share which represents a 13.5% year-over-year increase.
For the first quarter 2023, the management anticipates that core revenue growth will be around 5%. For the full year of 2023, the company expects that core revenue growth will be in the high-single-digit percent range. Organic sales growth is estimated to increase in mid-single digits in the first quarter and the full year.
Click here to download our most recent Sure Analysis report on Danaher (preview of page 1 of 3 shown below):
The various lists of stocks by length of dividend history are a good resource for investors who focus on high-quality dividend stocks. In order for a company to raise its dividend for at least 5 years, it must have durable competitive advantages, the ability to generate consistent profits even during recessions, and shareholder-friendly management that is dedicated to returning cash to investors.
They also have long-term growth potential and the apparent ability to raise their dividends in the future.
If you are interested in finding high-quality dividend growth stocks suitable for long-term investment, the following Sure Dividend databases will be useful:
- The Dividend Aristocrats List: a group of elite S&P 500 stocks with 25+ years of consecutive dividend increases.
- The Dividend Achievers List is comprised of ~350 stocks with 10+ years of consecutive dividend increases.
- The Dividend Kings List is even more exclusive than the Dividend Aristocrats. It is comprised of 48 stocks with 50+ years of consecutive dividend increases.
- The High Yield Dividend Kings List is comprised of the 20 Dividend Kings with the highest current yields.
- The Blue Chip Stocks List: stocks that qualify as Dividend Achievers, Dividend Aristocrats, and/or Dividend Kings
- The High Dividend Stocks List: stocks that appeal to investors interested in the highest yields of 5% or more.
- The Monthly Dividend Stocks List: stocks that pay dividends every month, for 12 dividend payments per year.
- The High Yield Monthly Dividend Stocks List: the 20 monthly dividend stocks with the highest current yields.
- The Dividend Champions List: stocks that have increased their dividends for 25+ consecutive years.
Note: Not all Dividend Champions are Dividend Aristocrats because Dividend Aristocrats have additional requirements like being in The S&P 500.
- The Dividend Contenders List: 10-24 consecutive years of dividend increases.
- The Best DRIP Stocks: The top 15 Dividend Aristocrats with no-fee dividend reinvestment plans.
- The 2022 High ROIC Stocks List: The top 10 stocks with high returns on invested capital.
- The 2022 High Beta Stocks List: The 100 stocks in the S&P 500 Index with the highest beta.
- The 2022 Low Beta Stocks List: The 100 stocks in the S&P 500 Index with the lowest beta.
The major domestic stock market indices are another solid resource for finding investment ideas. Sure Dividend compiles the following stock market databases and updates them monthly: