What are Dividend Challengers, Contenders and Champions? And how does it work?
David Fish came up with a simple way of categorizing U.S. dividend stocks. It speaks for it self to apply this to Hong Kong stocks and see what the results will be.
Mr. Fish is a well respected contributor to the Dividend Growth Investing strategy. His articles can be found on Seeking Alpha
Here we go:
- Dividend Champions: H.K. stocks that have grown dividends for the last 25+ consecutive years
- Dividend Contenders: H.K. stocks that have grown dividends for the last 10-24 consecutive years
- Dividend Challengers: H.K. stocks that have grown dividends for the last 5-9 consecutive years
There is 1 exception in the way both David Fish’ list and our is build. For the Hong Kong dividend stocks we listed all in the proper category that did not decrease their dividends. In the famous lists of David, all companies that did not increase their dividend for 1 year where out.
So if a H.K. listed Company decides to give the same amount of dividend this year as last year, they are still in. A decrease will kick them out.
The purpose of lists like these is to reduce RISK of not receiving any dividends or a amount less than last year. You can imagine a company that paid more and more dividends for only 5-years is a bit more risky then a company that paid steady dividends for 20 years.
Now, you see the company on the left chooses a bumpy dividend ride for her investors. Company on the right seems to have a solid strategy in place to keep dividend earners happy.
Still this is no guarantee there is all RISK is reduced. It is a part of the analysis. A recommendation, aim for 7-9 year at least. Most dividend suspensions happen after 5-7 years. Of course you will see dividend contenders making the hard choice to cut here and there, but is is more rare.
Hope you got a better understanding of what are Dividend Challengers Contenders and Champions. Next is how this Dividend Growth, RISK and Value combined make the Stock Screener such a wonderful tool.