Dividend Investing With a 10-10 Rule

10-10 RuleAfter watching an interview of Tom Cameron on Business News Network where he highlighted the 10-10 rule utilized by his investment firms. It is very pertinent to dividend investors since it’s all about the dividend growth. In fact, 10-10 stands for a company that increases dividends for 10 consecutive years with an average of 10% or more growth in dividends per year.

10-10 Rule Strategy

It’s a simple screening test really. You can follow this process of elimination.

  1. Identify companies that have paid dividends for the past 10 years.
  2. Identify the companies that have increased their dividends by an average of 10% per year for 10 years.

Rather than focusing on the yield, it focuses on the dividend growth to accelerate compound growth. A consistent growing dividend under a DRIP could double your holdings in a good time frame. Patience is quite important here as the growth in yield over many years is what you bank on to increase your holdings.

What is interesting is that a dividend aristocrat may not pass the criteria here even if they increase dividends for 25 consecutive years. The combination of both should provide a really solid investment though.

Top Holdings

Although historical data are available to filter stocks, it’s not always easy to filter on it without putting the data together yourself. Especially when you need to look at historical data. The fund highlights their performance and top holdings on their site but I thought I’d share the holdings here with some extra information. It does, in fact, keep up with the S&P 500 index.

TickerCompanyStock PriceDividend Yield10 Year Average GrowthConsecutive Dividend Increase
NVONovo-Nordisk A/S$124.421.52%23.5%14
TEVATEVA Pharmaceutical$50.001.64%29.7%10
ADMArcher-Daniels-Midland Co.$31.112.06%12.6%36
IBMInt’l Business Machines$166.561.80%17.8%15
WAGWalgreen$43.321.62%16.1%35
NSRGYNestlé SA$63.5914%14
CAHCardinal Health$44.511.93%27.6%14
MCDMcDonald’s Corp$80.983.01%28.3%34
NVSNovartis$63.483.72%10.6%16
PXPraxair, Inc.$103.391.93%19.6%18

Thoughts

I went back and looked at the stocks I reviewed in the past months and only one matches the 10-10 rule criteria: Enbridge TSE:ENBNYSE:ENB . Power Corp TSE:POW, Power Financial TSE:PWF and Great-West LifeCo TSE:GWO each had 8 years of consecutive double-digit growth and then lower growth for the last couple of years with no increase in dividends for 2010. A similar faith for the banks. The lack of dividend increase in 2010 basically fails the criteria and takes the companies out of the selection for another 10 years. I still consider them solid companies as you would see from my stock analysis and a reason that following a rigid rule may not always be best but it can sure simplify the process and eliminate emotions.

I started using this data points in my stock research and the criteria are part of my Canadian Dividend Performance List product. You can then filter the stocks by this criteria and any of the other 35 metrics presented.

DISCLOSURE: Please note that I may have a position in one or many of the holdings listed. For a complete list of my holdings, please see my Dividend Portfolio.

DISCLAIMER: Please note that this blog post represents my opinion and not an advice/recommendation. I am not a financial adviser, I am not qualified to give financial advice. Before you buy any stocks/funds consult with a qualified financial planner. Make your investment decisions at your own risk – see my full disclaimer for more details.

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