Dividend Kings shine brightly
On 02-07-2024, AlphaValue opened access to its subscribing clients to a Dividend Kings list of stocks which has been tested over the last two years. We were then pleased by a degree of outperformance (then 3% ytd). This has improved again, now at +7% (11-09 close), partly due to the fact that the Stoxx600 retreated a bit.
The absolute performance, however, is remarkable at +15% ytd. This is the point of interest of this short paper as it indicates a shift in the market mood in favour of quality stocks. This shift would have started back in last April (green line in next chart).
As a reminder, these ‘Dividend Kings’ are not big payers in spot yield terms but fantastic payers in that their dividends rise every year. This can only happen with steadily rising FCF which implies a superior business model. The 25 stocks populating this list have the following combined features (see next table): superior business models, excellent balance sheets, yield not so far from average, top-notch sustainability ratings.
Higher rates may take their toll on the quality issuers simply because they tend to trade at stratospheric multiples. Now that rate cuts are at hand, sentiment may have reversed. We are not sure that this is enough of an explanation for this 5-month outperformance.
Since Baloise has been replaced by UCB on 01-07, the list has incurred no change. Prior changes were made in early 2024, 8 months ago. The point here is that with Dividend Kings one is certain to see income growth and not to incur friction costs.
The absolute performance, however, is remarkable at +15% ytd. This is the point of interest of this short paper as it indicates a shift in the market mood in favour of quality stocks. This shift would have started back in last April (green line in next chart).
As a reminder, these ‘Dividend Kings’ are not big payers in spot yield terms but fantastic payers in that their dividends rise every year. This can only happen with steadily rising FCF which implies a superior business model. The 25 stocks populating this list have the following combined features (see next table): superior business models, excellent balance sheets, yield not so far from average, top-notch sustainability ratings.
Higher rates may take their toll on the quality issuers simply because they tend to trade at stratospheric multiples. Now that rate cuts are at hand, sentiment may have reversed. We are not sure that this is enough of an explanation for this 5-month outperformance.
Since Baloise has been replaced by UCB on 01-07, the list has incurred no change. Prior changes were made in early 2024, 8 months ago. The point here is that with Dividend Kings one is certain to see income growth and not to incur friction costs.
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