No. of Recommendations: 24
Randy,

Mergent's Dividend Achievers requires that a company increase its dividend at least once per five quarters.
Your methodology is too lenient.


Of course, you're entitled to your opinion, but I think that you also have to consider that theirs is too strict. It requires that companies announce dividend increases in every calendar year ("consecutive annual increases") yet imposes the 5-quarter requirement that can eliminate valid qualifiers. Under their criterion, a company that increased its payout in March 2007 and again in October 2008 would be eliminated, even though it announced consecutive annual increases...and may have done so since the dawn of time.

My methodology is deliberately more lenient...as explained under the Notes tab. Rather than focus on "consecutive annual increases," it focuses on "consecutive years of higher dividends," something that can be accomplished even with increases in alternating years. After all, is it really necessarily better to raise your payout by a penny each year...or to raise it by more than 2 cents every other year?? Including a company that pays more each calendar year...even if it's by raising in the middle of every other year...means presenting what may be an exceptional value. Likewise, what about a company (like McDonald's) that had been paying only annual dividends, which it raises each year? If it changed from, say a March payout to an August one, then it would be eliminated...even if it announced the largest increase in its history and extended its streak to 40 or 50 years. So the Mergent criteria are simply a bit too rigid...there has to be some flexibility.

There's another "dirty little secret" that I noticed in the Winter 2006 Mergent's. On page 14a, they state that "the following former Dividend Achievers did not meet volume/liquidity requirements." Among those eliminated were Badger Meter, Bowl America, Connecticut Water Service, Florida Public Utilities, Middlesex Water, Quaker Chemical, and SJW Corp...22 companies in all. Yet most of these have continued to pay (and increase) their dividends on a regular basis, and none has been delisted from their exchanges. So what's this all about?? All are functioning, publicly traded companies that meet all the stipulated criteria. The only answer that fits can be found on page 6a, under Notes From The Editor, where Mergent essentially brags about the ETFs that have been created to invest in its "Achiever" companies. The problem, of course, is that ETFs and funds have ceetain volume/liquidity requirements about the companies in which it invests. So it appears that Mergent has literally "sold out" to the ETF providers, eliminating companies that its "masters" do not find acceptable...for no reason related to their histories of dividend increases. What that means is that their listing is artifically low to begin with, and the "5-quarter" rule just eliminates more companies that actually increase their payout each and every year.
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