Dividends4Life: Has Dividend Growth Kept Up With Inflation?

Has Dividend Growth Kept Up With Inflation?

Posted by D4L | Saturday, March 24, 2012 | | 0 comments »

About a year ago, I published an article about dividends keeping up with inflation. At the time, I only had data going back to 1988 (22 years). Now I have found a better source, with S&P 500 dividend increases going back to 1960 (51 years). The S&P 500 is not a good proxy for a well-selected portfolio of dividend growth stocks. But it can be used to illustrate broad trends, and I think that it is instructive with respect to the question of whether dividend growth has tended to keep up with inflation.

There is no question that over very long time frames, dividend growth has handily exceeded inflation. Year-by-year, dividend growth was higher than inflation in 31 of 51 years. The average yearly rate of dividend growth (5.4%) exceeded the average annual inflation rate (4.1%) by 32%. Compounded over 51 years, dividend increases grew an initial amount by a total of 75% more than inflation. In other words, the dividend stream grew to more than 13 times its original size compared to almost 8 times the original amount for expenses.

Source: Seeking Alpha

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