Regarding the implication of increasing dividends along the company’s history, I’m a bit confused between two stated parts in the Qbank;
High dividend yields compared to the company’s records suggest that investors are expecting dividends to be cut. (So it is a bad signal)
Unexpected dividend increases generally signal to investors that a company’s prospects are strong.
I go for the second one but I need someone to clarify the missing part for me please.
Dividend yield is calculated as dividend/share price so if the the yield is increasing that likely means that share price is decreasing and hence not a good signal. Actual dividends increasing are positive because it shows that a company is committed to paying a dividend over the long term and is sustainable enough to do so because since dividend cuts will generally cause a negative reaction in the market no sane company is going to initiate a dividend only to cut it or reduce it shortly after initiating it.