Get Rich with Dividends: A Proven System for Earning Double-Digit Returns

CHAPTER 3

Past Performance Is No Guarantee of Future Results, but It’s Pretty Darn Close

No doubt you’ve seen loads of advertisements for mutual funds that tell you how much money their funds made but then warn you that past performance is no guarantee of future results. Just because a fund is up 10% one year doesn’t mean the managers will be able to repeat the feat the next.

But that’s not necessarily the case when it comes to Perpetual Dividend Raisers. Although the future rise or fall of the stock price may not be correlated to how it’s done in the past, the dividend should be very closely related.

Chances are, a company that has raised its dividend for 25 years in a row is going to do it again in year 26. And again in year 27. And in year 28.

As I’ll explain in the next chapter, there are very solid reasons that managements pay and increase dividends to shareholders. To change the company’s dividend program (i.e., not raising the dividend) after several decades represents a dramatic shift in policy that is not taken lightly.

In 2011, three companies were dropped from the Dividend Aristocrat Index: Eli Lilly (NYSE: LLY), Supervalu (NYSE: SVU), and Integrys Energy Group (NYSE: TEG).

In 2012, only one company fell off the list. Going back five years, which includes the financial crisis of 2008–2009, the average number of companies deleted from the index each year is five. Not including those two very difficult years, we usually only see two or three stocks fall off the list—far ...