The 2021 Dividend Challengers List - Sure Dividend

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The 2021 Dividend Challengers List


Updated on October 15th, 2021 by Bob Ciura

We maintain a heavy focus on quality dividend stocks. 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 at least 5 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 318 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 65 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

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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 High-Quality Dividend Challenger: Gilead Sciences (GILD)

Gilead Sciences is a biotechnology company that has increased its dividend for 6 years in a row, placing it on the Dividend Challengers list. Gilead stock is also appealing for income investors as it has a 4.2% current dividend yield.

Gilead operates with a clear focus on antiviral medication and treatments. Its main products include treatments for HIV, Hepatitis B, and Hepatitis C (HBV/HCV), but Gilead has also ventured into other areas such as oncology.

The company has expanded its product portfolio in recent years.

Source: Investor Presentation

Gilead Sciences reported its second quarter earnings results on July 29. The company generated revenues of $6.2 billion during the quarter, which was above the analyst consensus estimate. The company’s top line grew by 21% compared to the previous year’s quarter.

Gilead generated earningspershare of $1.87 during the second quarter, which was easily above the consensus estimate. Gilead tightened its revenue guidance range for 2021 with a midpoint of $24.7 billion, and the company has also tightened its earningspershare guidance, now expecting earningspershare to fall into a range of $6.90 to $7.25.

Click here to download our most recent Sure Analysis report on Gilead Sciences (GILD) (preview of page 1 of 3 shown below):

Final Thoughts

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:

Thanks for reading this article. Please send any feedback, corrections, or questions to support@suredividend.com.


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