Definition:

The 10-year Dividends per Share Growth Rate is a financial metric that measures the annualized percentage growth rate of a company's dividends per share over a ten-year period. It provides insight into the company's ability to increase its dividend payouts consistently over a long-term horizon.

Formula:

((Dividend per Share in Year 10 / Dividend per Share in Year 1) ^ (1/9)) - 1

How to use the metric:

Investors use this metric to assess the historical growth of a company's dividend payments, which can indicate financial health and management's commitment to returning value to shareholders. A consistent or increasing growth rate may suggest a stable or growing company, making it attractive for income-focused investors.

Limitations:

The 10-year Dividends per Share Growth Rate does not account for recent changes in dividend policy or financial performance. It may not reflect future dividend growth potential, especially if the company has undergone significant changes. Additionally, it does not consider the absolute level of dividends, only the growth rate.

Applies to:

This metric is most applicable to mature industries with established companies that have a history of paying dividends, such as utilities, consumer staples, and financial services.

Doesn't apply to:

It is less applicable to industries that typically do not pay dividends, such as technology or early-stage companies, where reinvestment in growth is prioritized over dividend payouts.

Summary:

The 10-year Dividends per Share Growth Rate is a useful metric for evaluating the historical growth of a company's dividend payments, providing insights into its financial stability and shareholder value return. However, it should be used in conjunction with other metrics and qualitative factors to assess a company's overall financial health and future prospects.