What is Dividend Growth investing?
It is long term investing in companies that have a proven record of raising their dividends year on year.
This characteristic is easy to find in the Dividend history of a stock. The magic about there companies is that the stock price is less volatile than the market. If there is a sudden drop, these stocks will bounce back and you will find that most of them seem to be immune to the sentiments in the market.
The dividends and the growth of this makes them a attractive investment that creates a passive income. Imagine getting paid because you are a share holder of a company just for holding the shares. Bonus: every year you get more dividends and thus more income.
For most Dividend Growth investors it is this increasing income that is the trigger to buy and to hold.
What are the risks?
One is you might go for the highest dividend. The highest dividend is based on current price and paid dividends over last book-year. That is no guarantee that coming year there will be the same amount being paid to shareholders.
Solution: Do your diligence. Check for signs that the company might be in trouble. Dividend Payout ratio, Dividend coverage ratio, Return on Equity and EPS growth ratio are great places to see your chances of getting dividends in the coming year(s)
The HKDS Stock Screener looks for these Risks too.
Nothing can be more frustration than sleeping and not receiving your dividends.
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