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Dividend Growth Investing

Written by Priya Kumar
Wed Jul 15 2020
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Dividend growth investing has long been the strategy of choice for both new and seasoned investors. Instead of relying on fluctuating share prices and unstable markets to hopefully make a profit, dividend stocks provide a steady, reliable income. Generated by a portfolio of shares in companies with a track record of paying consistent and increasing amounts of dividends each year.

 

How do you choose the best dividend growth stocks?

To predict the future performance of dividend growth stocks, you must look at the historical data of each company, to understand how it performed in the past. Potential investments should meet the following criteria as standard:

● Pays dividends to shareholders while also reinvesting in company stock
● Offers a minimum dividend yield of at least 3%
● Has a sufficient buffer between company income and dividend payments
● History of paying higher than average dividends
● Track record of increasing dividends year on year

When choosing dividend growth stocks for your portfolio, it’s essential to invest in a business that you fully understand. If you don’t know how a particular business makes money, how can you expect to predict future cash flows, or be aware of their competitive strengths and weaknesses?

Dividend Growth Investing

Benefits of dividend growth stocks

Once you’ve chosen the best companies for your portfolio, the perks of dividend growth stocks start to multiply.

Passive income
You can sit back and rely on guaranteed income at least four times per year, depending on the industries you invest in.

Compound interest
For long-term financial freedom, take advantage of the effects of compounding. Reinvest your dividend income back into your portfolio, and watch your profits grow exponentially each year.

Flexibility
As the owner of a dividend growth portfolio, you decide how much or little you want to contribute, at any time. And you get to choose whether to cash in your dividends or reinvest to keep growing.

Less stress
You’re safe in the knowledge that your portfolio will perform and pay out dividends, no matter how much the markets are fluctuating.

What are the best dividend growth strategies?
Opinions can vary as to the best dividend growth strategies. But if you keep the following in mind, rest assured you’ll make dividend growth investing work for you, and your bank account.

● Don’t rely on just one industry or economy to purchase shares in. Diversify your portfolio across a range of sectors to mitigate any losses.
● Use historical data to determine which businesses increase their dividends equal to or in excess of inflation every year.
● Long-term capital gains are taxed at a lower rate. So, hold onto your dividends for as long as possible to benefit from deferred taxes and earn more money in the long run.

With dividend growth investing, long-term financial security is the main goal. You can easily achieve this with the right tools that identify the best growth stocks to secure your future.

How can you find the best dividend growth stocks?
With MarketXLS, you can learn more about historical prices while creating portfolios that are specific to your dividend growth investment needs.

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