The 5-year dividend CAGR compares a company's trailing-twelve-month dividend total today against the total from five years ago, then annualizes the growth — a 5-year CAGR of 7% means the dividend has grown roughly 7% per year on average over that window.
A single year's dividend increase can be a one-off — a special catch-up raise, or a temporary boost from an unusually strong year. The 5-year CAGR smooths that out and reveals whether growth is a sustained policy rather than a single good year. Companies that have raised dividends every year for 25+ consecutive years (Dividend Aristocrats) or 50+ years (Dividend Kings) are prized specifically for this kind of consistency.
A strong historical growth rate says nothing about whether the company can keep it up — that depends on future earnings growth and the current payout ratio. A high dividend CAGR paired with a payout ratio already near 100% is a much weaker signal than the same growth rate paired with a payout ratio under 50%, since the latter has more room to keep raising the dividend even if earnings growth slows.
There's no universal target, but growth that outpaces inflation (roughly 2-3%+) while the payout ratio stays moderate is generally viewed as healthy and sustainable.
Informal titles for companies that have raised their dividend every year for 25+ years (Aristocrats) or 50+ years (Kings) — prized specifically for the consistency the 5-year CAGR is trying to measure over a shorter window.
No — future growth depends on earnings growth and the current payout ratio. A high historical CAGR paired with a payout ratio already near 100% has much less room to keep growing than the same CAGR with a payout ratio under 50%.
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Educational research only — not investment advice.