Cash Flow Kings With Rising Dividends

by John Bajkowski

Cash Flow Kings With Rising Dividends Splash image

Investors continue to seek out dividend income from common stocks even as the uncertainty about future dividend tax rates weighs on people’s minds. The 15% maximum rate for qualified dividends is set to expire at the end of this year unless Congress and the president act. However, the environment of low interest rates coupled with the relative stability of high-yield stocks during market downturns keep dividend-paying stocks on investor’s shopping lists.

The First Cut seeks out domestic, exchange-listed stocks that have consistently raised their annual dividend payment over the last seven years while maintaining positive free cash flow over each of the last seven years. Financial stocks were excluded because their financial statements are not comparable with firms in other industries.

Cash flow is fundamentally different from earnings. Earnings are determined using principles of accrual accounting, while cash flow measures the direct consumption and generation of cash. The First Cut screens for positive free cash flow, which is calculated by examining cash flow from operations (a measure of a firm’s ability to generate cash from day-to-day operations) and then subtracting capital expenditures and dividend payments. Free cash flow is considered to be excess cash flow that a company can use as it deems most beneficial. Strong free cash flow provides financial flexibility to increase dividends, develop new products or services, enter new markets, pay off debt, or buy shares back.

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John Bajkowski is president of AAII.


Corrie therese from California posted over 3 years ago:

this is very good article for individual investors like myself.

Corrie therese from California posted over 3 years ago:

Also this article has no print option.

John from Illinois posted over 3 years ago:

Corrie, there is a print option for the article. It is along the left hand side of the screen after around two paragraphs into the article. The header is listed as "Print this article" and below you should find a link "Printer & mobile friendly version." that brings up version of the page with only the article.

Jerrold from Florida posted over 3 years ago:

The annual dividend growth rates - Does the company raises dividends annually? For how long? By what percentage? For how many years have they done so?

Just some really important questions left unanswered.

John from Illinois posted over 3 years ago:


The criteria used for the First Cut are listed below the table of passing companies. This first cut required an increase in the annual dividend per share payment for each of the last six years. The screen did not require a minimum growth rate. The table of passing companies lists the three-year annual growth rates. The First Cut is limited to one page of the AAII Journal, so it can be difficult to detail the filters behind the First Cut.

N from Georgia posted over 2 years ago:

Having recently retired I am on the hunt for safe Dividends

Nash from Georgia posted over 2 years ago:

As a recent retire I am converting to dividend stocks. More information like this wuuld be appreciated.

George Blue from Texas posted about 1 year ago:

I follow the DI portfolio (12 stocks) and would like to present their increasing yield (last 10 years OK) along with FCF and current yield. Can you advise? Thanks.

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