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How do I Study a Dividend History?

Jim B.
By Jim B.
Updated May 17, 2024
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The dividend history of a company is crucial information to investors trying to decide whether or not they can reliably count on dividends from that company. This information is readily available on many investing sites and on the sites of most companies that pay out dividends. When studying dividend history, investors should be looking for trends that indicate some sort of stability in terms of the dividend yield paid out by a company. They should also compare this information with historical financial information relating to the company to see how the dividend payouts relate to the company's financial performance.

Dividends are highly valued by investors, since they offer bonuses in excess of the value of stock shares. Companies pay out dividends to investors as a way to reward the loyalty of long-time investors and to attract new investors into the fold. A company is under no obligation to pay out dividends though, so investors must determine if they can count on these extra incentives in the future. Studying the dividend history of a particular company can yield a reasonable idea of what to expect from a company down the road.

It is important for investors studying a dividend history to understand that the cash amount of a dividend payment is not the best indicator of the value of the dividend. For example, a company trading at $100 US Dollars (USD) per share that pays out a dividend of $20 USD to investors is giving more value to investors than a company that pays the same dividend but is trading at $1,000 USD per share. The dividend yield, which can be calculating by dividing the amount of the yield by the share price, is a much better indicator of value.

By watching how the dividend yield trends over a long period of time, an investor can get useful information from the dividend history. Very simply, a company that has proven that it will continually raise dividends over a long period of time can be trusted to continue to do so in the future. Conversely, a company that has a history of stagnant dividend payouts or erratic yield amounts is a far riskier bet.

Investors should also be ready to compare the dividend history to the corresponding financial strength of the company in question. A company that freely pays out high dividends when things are going well but scales way back on them in hard times likely cannot be trusted in a volatile economic climate. Those companies that steadily increase yields even in the worst of times are the best choices for investors looking for long-term stability and growth.

WiseGEEK is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.

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