Dividend paying stocks will always be attractive to investors because of the income they can add to portfolios. A strategy of finding high-quality dividend stocks with a history of annual increases can yield powerful results when those dividends are reinvested over the years. Unfortunately, just because a company has a history of annual increases, is not a guaranteed that it will be able, or willing, to continue making the payments in the future.
There are really just a couple of decisions that a company can make about its dividend program. It can leave the payments the same, increase, decrease or completely suspend its dividend. In the case where a dividend program is suspended, investors usually have more problems to worry about than just the lack of dividend. Companies will not suspend their dividend program unless something serious is taking place, so that the dividend will be the least of your concerns at that point.
What tends to happen first is a company's decision to halt its annual increase. This is a sign that management is losing faith in the company's ability to keep earnings growing, or that the payout ratio is getting too high.
We are going to look at a few companies with high payout ratios whose streak of annual increases may be in jeopardy of coming to an end sooner rather than later.