Build steady income with reliable payers that grow dividends year after year
Dividend growth investing focuses on companies that not only pay dividends, but consistently increase those payments year after year. These are typically mature, profitable businesses with stable cash flows that can afford to return capital to shareholders while still investing in the business.
The strategy provides two sources of returns: the dividend income itself (typically 2-4% annually) plus capital appreciation as the stock price rises. As dividends grow over time, your yield on cost increases dramatically — a 3% yield today could become 6-8% in 10 years if the company keeps raising payouts.
Think of dividend aristocrats — companies that have raised dividends for 25+ consecutive years through recessions, market crashes, and economic cycles. These businesses prioritize returning value to shareholders and have the financial strength to maintain that commitment through thick and thin.
High enough to generate meaningful income, but not so high that it signals danger. Sweet spot is typically 2.5-5% for quality companies.
Track record of raising dividends annually for 5-10+ years. Demonstrates commitment to shareholders and financial stability.
Paying out 40-60% of earnings leaves room for dividend growth and business reinvestment. Ratios above 80% are risky.
Consistent, growing free cash flow ensures the company can afford both dividends and capital expenditures.
Defensive industries, recurring revenue, or essential products that perform well in all economic conditions.
Conservative balance sheets with manageable debt ensure dividends remain safe during downturns.
Annual dividend as percentage of stock price
Annual increase in dividend per share
Dividends as percentage of earnings
Track record of raising dividends
Cash flow available to cover dividends
Our dividend scoring system identifies reliable income stocks with growth potential. High scores mean:
Global brand with 50+ years of dividend growth
Yield
3.2%
Growth Rate
7%
Payout Ratio
52%
Streak
58 yrs
Dividend Aristocrat, recession-resistant products, global distribution, strong brand moat
Regulated utility with stable cash flows
Yield
4.1%
Growth Rate
5%
Payout Ratio
58%
Streak
22 yrs
Predictable earnings, regulated revenue, essential service, strong regional monopoly
Diversified pharma with strong pipeline
Yield
2.8%
Growth Rate
9%
Payout Ratio
45%
Streak
15 yrs
Multiple revenue streams, patent protection, aging demographics tailwind, defensive sector
Dividend Aristocrats are S&P 500 companies that have increased dividends for 25+ consecutive years. This elite group demonstrates:
Only the strongest businesses can maintain dividend growth through multiple recessions and market cycles.
Management commitment to returning value, not just hoarding cash or overpaying executives.
Aristocrats tend to be more stable during market downturns, providing portfolio ballast.
Decades of growth create exponential income increases for long-term holders.
1. Chasing ultra-high yields: Yields above 8-10% often signal trouble. Dividend cuts usually follow.
2. Ignoring payout ratios: Ratios above 80% leave no room for error. One bad quarter can force a cut.
3. Forgetting about growth: A 5% yield is meaningless if it never increases. Inflation erodes purchasing power.
4. Lack of diversification: Don't overload on one sector (e.g., all REITs or all utilities).
5. Buying based on yield alone: Check the underlying business health. Is it declining or growing?
💡 Read our full guide: 5 Common Mistakes in Dividend Investing
Use dividend reinvestment plans (DRIPs) to compound faster in accumulation phase.
Build a portfolio of 15-25 dividend stocks across different industries.
Watch for deteriorating coverage. Rising ratios signal potential trouble ahead.
Dividend + price appreciation matters. Don't sacrifice growth for extra 1% yield.
Even aristocrats occasionally cut dividends in crises. Evaluate the business, not just the yield.
See today's highest-scoring dividend stocks with sustainable yields and growth potential.
View Today's Dividend Stocks