Signs of Dividend Increase

In Continuance of an article 'Signs of Dividend Cut', allow me follow up with a the other side of the coin. Companies can also originate a dividend increase. In fact, plentifulness of successful companies, always present dividend additions twelvemonth after year. There are plenty of grounds for dividend increase; management ego, financial strength, inefficient money management. Whatever it is, dividend addition is normally a good mark for publicly traded companies.

It is true that dividends are taxed twice; once at corporate degree and another 1 at individual tax filing. However, companies that wage its dividend can't lie about its net income figure. Money received by shareholders is money that is obtained from the corporation. Without increasing profit, corporation is less likely to raise dividends.

Here are respective indicants that management will raise future dividend:

Increasing Cash Flow From Operations. When cash inflow is positive and increasing, it will stack up in the balance sheet. One manner to reinvest the cash flow is by distributing it as dividends to shareholders.

Positive Network Cash. If a company is increasingly profitable and have positive network cash on its balance sheet, the opportunity is those cash will be distributed to shareholders in the word form of higher dividends.

Low Capital Expenditure. When the capital outgo demand for a firm is low, the company have more than cash to use. Furthermore, if the business operation generate more than than and more profits, there is no ground why management should keep back the cash.

No Acquisition Target in sight. A company may make up one's mind to collect cash in advance of future acquisitions. However, if a company operates in an industry where no acquisition target in sight, it will eventually raise its dividend to administer the extra cash to shareholders.

Overvalued Stock Price. Smart management cognize how to best utilize its resources. When the company's stock terms is overvalued, it is not wise to purchase back its ain shares. With net income piling up and cash left unused, the lone sensible manner is to rise dividends.

While most of the above criteria are important, the most critical demand for a dividend raise is increasing profit. Without profit, the company have no resource to make anything. Therefore, if you desire to put a company who will raise its dividend, see purchasing a stock of a company that is highly profitable and is expected to increase net income for a long time.