We continue our updates for the detailed dividend stock pages, as of today, additional estimated future total return data is available for the dividend kings and dividend aristocrats in our database. The individual pages now include the following estimated future total return overview. Furthermore, the estimated EPS growth for the next 5 years is also available.
This section contains historical and forward-looking data. Estimating expected future total returns is based on two main components for dividend growth stocks:
- Dividend yield
- Change in share price
The change is share often comes from dividend growth which is mainly driven by earnings per share growth and the difference between the share price and the fair value. The expected price-to-earnings ratio over the next 5 years or the average dividend yield over the last 5 years is often used to estimate the change in the share price. The assumption made is that the share price will return over time to this average value.
To estimate the future total return the following values are added together:
- Estimated EPS growth next 5 years, as an indicator for the average dividend growth
- Average dividend yield, assuming the stock will return to this level
- Extra return due to over/undervaluation
By providing historical data such as total return and dividend growth over the last 5 years, allows the investor to check those estimates.
See for more details also the article Six Dividend Aristocrats at Risk