Glossary
Dividend Growth Stock
Stocks of firms that keep raising their dividends
Dividend growth stocks are shares in companies that have raised their dividend year after year. The current yield may be modest, but the amount received grows over time.
Sustaining dividend growth requires sustained earnings growth, so a record of rising dividends is itself evidence that the business is expanding steadily — one number telling you several things.
They differ from high-yield stocks. Between a company paying 6% that never raises it and one paying 2% but growing it 10% a year, the latter is ahead within a decade.
Inflation protection comes from the same feature. A fixed dividend loses real value as prices rise, while a growing one preserves purchasing power.
Whether the dividend was ever cut is worth checking. Maintaining it through a crisis indicates solid finances; a history of cutting it warrants understanding why. The payout ratio matters too. If dividends already consume most of earnings, there is little room left to keep raising them.