Lesson 4.2 · 2 of 5 · Dividends in depth
Dividend history: growth rate, Dividend Aristocrats and dividend cuts
A company’s dividend history shows how reliably it has paid, and raised, its dividend in the past. Read at least ten years: how often it went up, by how much a year on average and whether it was ever cut. A long record says something good about the business, but it doesn’t guarantee next year.
Terms in this lesson
- Years of dividend growth
- How many years in a row the company has raised its dividend.
- CAGR
- How much something grew on average per year, counting the compounding.
- Payout ratio
- The part of profit that goes to shareholders as dividends.
Coca-Cola’s dividend over ten years
Coca-Cola’s dividend per share for 2016-2025, in dollars: 1.40, 1.48, 1.56, 1.60, 1.64, 1.68, 1.76, 1.84, 1.94 and 2.04.
Between 2016 and 2025 Coca-Cola’s dividend rose every year, from $1.40 to $2.04 a share. The rises were small and regular: between 2.4% and 5.7% a year. In February 2026 the company raised it again, to $0.53 a quarter, or $2.12 a year.
Definition
How do you work out the average yearly growth?
Compound annual growth rate: (last ÷ first)^(1 ÷ number of years) - 1.
The compound annual growth rate (CAGR) is the steady rate that takes you from the first figure to the last. Mind the number of years: from 2016 to 2025 there are ten dividends but only nine rises, so you raise to the power of 1 ÷ 9. A simple average of the yearly percentages comes out slightly different and is less accurate.
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Create a free accountWhat are Dividend Aristocrats and Dividend Kings?
Dividend Aristocratsan S&P index
- S&P 500 companies that have raised their dividend every year for at least 25 years in a row
- The S&P 500 Dividend Aristocrats index gives each one the same weight
- A company leaves the index once it stops raising its dividend
Dividend Kingsan informal label
- Used by the press and investing websites for companies with at least 50 years of consecutive rises
- Not an S&P index; lists vary from one source to another
Coca-Cola belongs to both groups: on 19 February 2026 it raised its dividend again, taking its run of consecutive annual increases to 64 years. That says a lot about a business that has come through recessions, inflation and crises. It says nothing about the price you pay for the shares.
Dividend cuts: Bank of America in 2008-2009 and Shell in 2020
| Company | Before | After | When |
|---|---|---|---|
| Bank of America | $0.64 a quarter | $0.32 | 6 October 2008 |
| Bank of America | $0.32 | $0.01 | 16 January 2009 |
| Shell | $0.47 a quarter | $0.16 | 30 April 2020 |
From the companies’ announcements filed with the SEC. At Bank of America, the quarterly dividend fell by 98% in just over three months.
Real case
What did the companies say?
“We cannot pay out what we have not earned.”
That was how Bank of America’s chief executive explained the first cut in October 2008: the bank needed capital in the middle of the financial crisis. In April 2020 Shell said that, after the pandemic and the slump in oil prices, keeping shareholder distributions at the same level was “not prudent”. In both cases, anyone living off the dividends lost much of their income, right in the middle of a crisis.
What dividend history tells you, and what it doesn’t
- ConsistencyHow many years in a row it has paid and raised the dividend. What it did in 2008-2009 and in 2020 matters most.
- PaceThe compound growth rate over five and ten years. A sharp slowdown suggests the business is finding growth harder.
- Comparison with profitIf the dividend grows faster than profit year after year, the payout ratio climbs. Sooner or later the pace has to slow.
Lessons are educational. They are not a recommendation to buy or sell. Investing involves risk and you can lose money. Sources: Coca-Cola, Forms 10-K for 2016, 2019, 2022 and 2025 and the “Year End” investor relations page (annual dividend per share 2016-2025) and dividend announcement of 19 February 2026 ($0.53 a quarter, $2.12 a year, 64th consecutive annual increase); S&P Dow Jones Indices, S&P 500 Dividend Aristocrats index page (at least 25 years of increases, equal weights); Bank of America, announcements of 6 October 2008 and 16 January 2009 (SEC); Royal Dutch Shell, first quarter 2020 interim dividend announcement (30 April 2020, Form 6-K).