Dividend Growth Forecast Methodology

Forecast horizons

The forecast publishes 1-year, 3-year, and 5-year dividend growth rates. Each is annualized (CAGR equivalent), not cumulative.

Model inputs

Historical dividend CAGR over the past 1, 3, 5, and 10 years.

Current trailing-twelve-month payout ratio (earnings basis) and its 5-year trend.

Consensus EPS forecast for the next two fiscal years (sourced via our data provider).

Sector- and industry-level peer growth rates as a stabilizer for low-history names.

How the forecast combines inputs

The model targets a steady-state payout ratio (typically 50–60% for industrials, 70–90% for utilities and REITs). When the current payout is below target, forecast growth equals consensus EPS growth. When above target, forecast growth is capped at consensus EPS growth minus the gap to target.

For Aristocrats and consistent growers, the model floor is the lower of (5-year historical CAGR, consensus EPS growth). Forecasts never project negative growth — a company expected to cut its dividend gets surfaced via the Safety Score instead.

Limitations

Forecasts are model outputs and represent the mean expected scenario, not a guarantee. Actual dividend growth depends on board decisions, business performance, and capital allocation priorities.

For high-yield ETFs (covered-call income, BDCs) the model is structurally noisier because distributions vary period-to-period; treat ETF forecasts as ranges, not point estimates.