Dividend

The Manager looks at the dividend yield, commitments to increasing the dividend in the past and expectations for future increases. Companies with higher dividend yields but acceptable pay-outs and therefore better dividend growth potential will get a higher conviction level for their dividend policy than companies that are paying overstretching, for instance by paying dividends above 100% of earnings limiting the dividend growth potential. When looking at the history of dividend payments the highest scores are for companies with substantial increases of at least twice the rate of inflation; companies with long records of increases, also throughout economic downturns; and companies with more frequent increases than their peers. The Manager is judging the willingness of companies to pay dividends by analyzing the dividend policy, which should be a clearly articulated growth policy, and the management incentives, which should include a total shareholder return component. The ability of the company to pay dividends follows from low pay-out ratios, highly stable and growing cash flow streams, and a leverage level that makes sure fixed costs do not threaten the dividend.

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