Revisiting Dividend Growth & Inflation

Some older readers of my blog may remember my old blog site on the wikidot platform (was surprised it is still up by the way) and one of the topics I was extremely focused on back then was dividend growth companies that routinely beat the rate of inflation. I viewed it as such an important topic I even created the Inflation Beaters Index that was based on David Fish’s Dividend Champion list and the end of the year there would be a summary post that looked like this:

I stopped maintaining the index at the end of 2020 because it took quite a bit of effort to maintain and I believe only one fellow blogger outside of myself was actually using the file. As such, when I migrated to the wordpress platform I dropped the topic.

The motivation for pulling his list together was to validate the claims that dividend growth investing is good for combating inflation. At the end of the day the results were just…ok. Not great but no bad either. At the end of 2020 the Dividend Champions list (companies that have grown their dividends for 25+ years consecutively) totaled 138 companies. Out of that only 49 companies (36%) were able to not just raise their dividend but also beat the rate of inflation every year. Needless to say companies whose dividend raises exceed the inflation rate are much more rare.

Going back to that original list, I pulled the top 6 with the longest streaks and updated their streaks. I realize 2022 is not over but if I list the companies most recent raise announcement we can take an educated guess if these companies will remain at the top. With only 2 of 6 having a definitive outlook of raising their dividend more than inflation it doesn’t paint a great picture.

CompanyTickerConsecutive Yrs Inflation Beat thru 20212022 Div Incr.Likelihood of beating 2022 Inflation
McDonald’s Corp.MCD4310.14%Definitely
Johnson & JohnsonJNJ406.60%Unlikely
Medtronic plcMDT387.93%Slim
Automatic Data Proc.ADP0Failed to beat 2021 Inflation
Computer Services Inc.CSVI377.40%Slim
Target Corp.TGT3720%Definitely

By the end of this year I would estimate the list gets viciously cut down to just 16 to 18 companies out of the original 49. Inflation has been brutal this year all around and even dividend growth did not provide a reprieve. However, the raises we did receive did dull the pain some and it is better than the alternative of a dividend cut or freeze.


4 thoughts on “Revisiting Dividend Growth & Inflation

  1. Yes I remember this from your old blog. I think I’ll do a similar exercise with the stocks in my portfolio at the end of the year. I usually just compare the percentage increases against each other and vs the 5yr average but easier enough to compare it to inflation as well. And the beaters if any will get weighted slightly higher on my “add” list


    • That is a good approach. I think another important piece is recognizing the traits. Pricing power (aka moat) is probably the strongest factor. MCD is a good example they have the pricing power and decent management to react fast enough to inflation costs by raising prices.


  2. Interesting idea and I’m sure it’s not going to look so hot for 2022 unlike the inflation number. I’d be interested to see how things look on a slightly more extended time frame like 3-5 years for cumulative DGR vs inflation. With inflation being high right now I wouldn’t be surprised if some discussions are going on in the board rooms to do more muted increases to see how things play out. But expanded to say a 3 or 5 year period you’ll see better comparisons.


    • To keep things equal I would think you have to make inflation a 3-5yr average also.

      I’m not so sure about the muted increases from inflation, many of my holding reported a rough Q1 & Q2 earnings with all citing inflation and plans to raise prices. Here we are with Q3 earning reports rolling in and so far have generally improved most likely because of price increases. I see bigger issues with FX and interest rates hurting earnings.


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