At the same time company has managed to deliver a 7.20% average annual increase in its EPS since 1998.
The ROE has increased from 29% in 1998 to 36% in 2007.
Annual dividend payments have increased over the past 10 years by an average of 8.10% each year, which is higher than the growth in EPS. An 8% growth in dividends translates into the dividend payment doubling almost every 9 years. DEO has indeed managed to double its annual dividend payment of $1.395 in 1999 last year (2007).
If we invested $100,000 in DEO on December 31, 1997 we would have bought 2892 shares. In April 1998 your semi-annual dividend income would have been $2406. If you kept reinvesting the dividends though instead of spending them, your semi-annual dividend income would have risen to $6582 in September 2007 and $4272 by June 2008. For a period of 10 years, your annual dividend income would have increased by 67%. If you reinvested it though, your annual dividend income would have increased by 129.60%.
The dividend payout has remained above 50% for the majority of our study period with the exception of 2006. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.
I think that DEO is attractively valued with its low price/earnings multiple of 16 and above average yield at 3.60%. Even though the dividend payout is higher than the 50% I like the fact that it is has been steadily decreasing over the past decade.
I will keep looking for growing internationally based corporations which have increased their dividends and earnings consistently for at least five to ten years.
Disclosure: I do not own shares of DEO
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