What is Dividend Growth Investing?
Dividend Growth Investing is a buy and hold investment strategy (5 years or longer)
Simply put, it is a tree that grows itself and brings more fruits every year. Even if the tree would not grow. ehh… what?
Dividends are payments from the company to the shareholders. It is a sort of income, passive income, dividend income.
Example: You buy 100 shares total $ 1000, yield is 4%, your dividend payment will be $0.40 per share that brings a total of $40.00 in your pocket
Let’s add Growth to this equation: Dividend Growth means, more dividends get paid, to you the mighty investor, year on year.
So, the next year the company decides to pay $0.45 per share. You still have those 100 stocks and low and behold you receive $45.00. That is +$5.00 more than the previous year, hopla, in your pocket for holding these shares.
The Growth factor is going from $40.00 to $45.00 in 1 year, that is a raise of: 12.5% on income.
Imagine that happening every year! $50.63, $56.95 assuming the dividend growth is 12.5% per year.
This is the fruit coming from the tree. We did not even look at the tree it self.
The $1000.00 you paid for the stocks, how much would it be if you sold them now?
This is not that simple to predict. But fact is that companies that have this dividend awarding policy in place also grow in value slow and steady. Also they tend to bounce back more quickly when a market crash announces itself.
This is a plus, but you can imagine that as long as the goose lays its golden eggs, the fat% of the feathered friend only matters if it gets to skinny to lays less or no eggs at all.
(no animals were hurt in this experiment)
Conclusion: What is Dividend Growth Investing, it is a strategy in which you invest in enterprises that provide you a steady, growing passive income. To get to that the most important goal is to track down and vet companies that have a proven track record of dividend growth and a foreseeable future that that will keep paying you.
PS: Dividend Growth Investing is gaining popularity and don’t take my word for it. Here is a list of bloggers that post their monthly dividend income.