what are "reasonable" values for dividend growth and yield averages over five years?
That's hard to quantify. Dividend paying stocks have to compete with other income producing investments such as bonds. An investor can choose to purchase a stock with a dividend or a bond that pays interest. Thus, one way to determine an acceptable dividend yield is to compare the dividend yield to the yield of a bond that matures in the same time frame you are planning to hold the stock.
what are the good signs, and the warning signs?
Some good signs:
- Steady or increasing revenue
- Steady or increasing cash balance
- Steady or improving margins
- Decreasing debt
For example, using data from here, Pfizer (NYSE : PFE) has a dividend yield of 3.9%, a 5-year average yield of 5.1%, and a five-year growth average of -0.02%. How do I interpret that?
PFE currently has a dividend yield of 3.9%. The current dividend yield is the yearly dividend amount divided by the stock's current price.
I couldn't find information on how the 5-year average yield was computed on the website you reference. I could think of a couple of different ways. One way would be to take all the dividends paid over the last 5 years and divide it by the current stock price. Another way would be to take the dividend yield at the end of each year and average it over the last 5 years. My guess is they did the latter.
The five-year growth average would be the amount the actual dividend payment (not the yield since that depends on the stock price) has increased over the last five years. Five years ago PFE paid a yearly dividend of $0.96 and now the pay a yearly dividend of $0.88. This computes to an annual growth rate of -0.02% for the dividend payment.