A case study of a great business with a history of paying dividends

At the Edge Fund, I especially like to buy a piece of businesses that demonstrate a history of paying dividends. And, it is even better if the trend of the dividend stream is rising over time.

Businesses that possess such a history of paying steadily increasing dividends do so because of the positive cash flow generated from the operations of the business. With ARB Corporation announcing a special dividend of $1.00 per share this week (when share price was $12.30), that seemed a good enough reason to highlight why businesses with economics such as ARB Corporation make great long term investments.

ARB Corporation (ASX:ARP) – Quick case study
Do you see a correlation when comparing the annual total dividend with the glacial speed of the yearly price chart?

The Yearly Chart

Dividends Paid since 2004

Year 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Total Dividends 9.5 cents 10.5 cents 11.5 cents 13 cents 15 cents 17.5 cents 19.5 cents 24 cents 25 cents 28 cents 29 cents
Special Dividend 20 cents 40 cents $1.00

Time is the friend of a wonderful business
The correlation between rising dividend payments and rising share price in this instance is quite easy to see.

At the Edge Fund, I am continually assessing Australian businesses looking to find those with characteristics like ARB Corporation. That is, businesses that have investment characteristics that make them safe, reliable and profitable over time.

This article is published by Dean Mico.

Disclosure: The Edge Fund owns shares in ARB Corporation.

The information provided in this article is intended for general use only. The article is intended to provide educational information only. Please be aware that investing involves the risk of capital loss. The information presented does not take into account the investment objectives, financial situation and advisory needs of any particular person, nor does the information provided constitute investment advice. Under no circumstances should investments be based solely on the information herein.

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