Dividend growth is an investment style that prioritizes stocks with a history of steadily increasing dividend payments. It targets companies with durable cash flows and a track record of raising dividends year after year.
Investors and portfolio managers screen for multi-year dividend increases and sustainable payout ratios, alongside earnings growth that supports future raises. The approach blends income potential with potential capital appreciation, since rising dividends can reflect improving profitability and investor confidence. It is commonly used in income-focused portfolios and can be paired with broader strategies such as growth or quality investing. While the current yield may be modest, investors may balance growth with yield considerations. Reinvesting dividends can accelerate compounding, while some investors take dividends as income. Key risks include dividend cuts during economic stress, reliance on earnings visibility, and sector concentration.
Dividend growth is one style among equity investment styles and can be assessed using metrics like the dividend growth rate (DGR) and the compound annual growth rate of dividends. It is often discussed alongside related concepts such as payout ratio and dividend yield.
In a dividend growth approach, an investor might look for a company with a long history of annual dividend increases and a payout ratio aligned with earnings growth.
Dividend · Dividend Yield · Dividend Aristocrats · Payout Ratio · Dividend Growth Rate · Income Investing