Entering text into the input field will update the search result below

There Are 3 Words In Dividend Growth

Apr. 29, 2015 7:17 PM ETSYY, AAPL32 Comments
The Dividend Guy profile picture
The Dividend Guy

I decided I didn't have enough from the article I wrote last week about dividend reports. Last week, I knew I was opening a can of worm when I wrote that I don't understand the importance of tracking my dividend income on a monthly basis. While the discussion was very interesting on this blog, I got crucified for blasphemy on Seeking Alpha when they republished my article (at least they thought it was good enough to be read! Hahaha!). Don't worry, I'm not going to go back to this post to defend myself, I really don't mind if some cranky individuals decided to go hard on me. I'm here to take the discussion further about what dividend growth investing is.

What I learned from last week's post is that defining words you use is very important as we don't all have the same definition of them. Then I thought about my own definition of dividend growth investing and I realized that my definition probably differs from most "classic" dividend investors' ideas. Because "dividend growth" is written with three words…


The first concept of dividend growth investing is obviously about the precious distribution companies pay their investors. The distribution can be paid monthly or the wait can be as long as yearly, but most stocks pay dividends on a quarterly basis.

Much empirical research has been done during the past 50 years and many of them conclude that dividend paying stocks will ultimately outperform the stock market over a long period of time. This makes total sense when you think about the basics; a dividend is distributed to shareholders only after the company had made a profit and paid its taxes. In fact, if the company has a better usage of the remaining monies, it may not even pay a dividend. By deduction, you can determine that

This article was written by

The Dividend Guy profile picture
My name is Mike and I’m the author of The Dividend Guy Blog & The Dividend Monk along with the owner and portfolio manager here at Dividend Stocks Rock (DSR). I earned my bachelor degree in finance-marketing, own a CFP title along with an MBA in financial services. Besides being a passionate investor, I’m also happily married with three beautiful children. I started my online venture to educate people about investing and to be able to spend more time with my family. I started my career in the financial industry back in 2003. I earned several promotions along with a good pile of diplomas. I had lots of fun working with clients in private banking for half a decade, but thought I could do more with my life. In 2016, I decided to take a leap of faith and left everything behind to travel across North America and Central America with my family. We drove through nine countries and stayed three months in Costa Rica before returning home. This was an eye-opening adventure that led me in 2017 to quit my job in the financial industry and pursue my dream; helping others with their personal finance through my investing websites. You just found the reason why I quit my suit & tie job!

Recommended For You

Comments (32)

lfbill profile picture
Good article, but I would have called it "three concepts" rather than "three words". But, of course, that's nit picking.
Sherry Collum profile picture
LOL! I looked all over for the 3 words....
crazty4tennis profile picture
Great article. Thank you for sharing. How about adding COP,T,VZ,ABBV,TD, and D? These are generous and consistent dividend payers.
mango_man profile picture
I almost made an appointment with my optometrist, as I only saw two words in "Dividend Growth."

Just a helpful fyi, you defined "dividend" as the first concept, not the first word. If you want to play with the definition of "word," that's fine but you should be consistent and use it throughout.
Dale Roberts profile picture
I agree with the premise though. One need not look any deeper than buying companies with a long history of growing dividends.

The tens upon tens upon billions of dollars of research will mostly get you a fair price for your purchase for the times. The market is professionally priced. Very few would know more (or find an advantage) than the collective research of Mr. Market that is dominated by professionals.

From there, buy and hold.

southernsanta profile picture
"Very few would know more (or find an advantage) than the collective research of Mr. Market that is dominated by professionals."
I agree that it is hard for a private investor to beat the pros at their game. However, one does not need to play "their game". Funds that advertise "dividends and income" still have high turnovers meaning they hold the best positions for a couple of years and many for less than a year. Positions I look at often have low ratings (hold or underperform) but a couple of years later (after appreciating) are toted as buys. There are also some stocks that pros don't bother with - low caps, preferred, MLPs, etc. these are not part of the Pros universe.
six profile picture

This comment demonstrates how little some investors understand about the economic theory behind their investments.

Your comment is actually contradicts itself. By choosing a stock or fund based on dividend payments alone you are performing a type of fundamental analysis (albeit a very limited one). You are doing exactly what you say is impossible- finding outperformance through analysis.

"Very few would know more (or find an advantage) than the collective research of Mr. Market that is dominated by professionals."

If you believe that all issues are priced correctly at all times (the core tenant of Efficient Market Theory and exactly what you say in your comment) then you would simply buy and hold funds that represent indices. You would never attempt to price or time the market, investing money whenever you had it to invest. You would only sell to rebalance the portfolio (if you were using an asset allocation model based on Modern Portfolio Theory).

But most of all you would not write articles on "Seeking Alpha" because "Seeking Alpha" is investment speak for gains over and above what an index provides. Investors seek "alpha" through many means- fundamental analysis, technical analysis, trading strategies etc... "Alpha" can NOT be gained through investment in indices by it's very definition.

BTW, how is that scardey cat portfolio doing these days?
Hardog profile picture
I never bought that cliché "the market has priced that in". My option trading has strongly convinced me that it is a fallacy. Most recently AAPL which I love, felt it would not reach 130 by 7 May. It did great but the market punished it , why? Was that downdraft priced in or was it a matter of good news has become bad news.
Dale Roberts profile picture
Buy and hold. You sold two aristocrats? OK BNS would be an aristocrat except for that one little hold in the Great Recession, then it went back to dividend growth.

Less thinking. More doing nothing.

Just don't do something. Sit there.

SDS (Seductive Dividend Stocks) profile picture
Ned Davis Research reports are tricky for DGis - see http://seekingalpha.co...
Uain53 profile picture
Don't want no glitter, no Hollywood. All I want is to lay it down and to lay it down good..

... apology to Mr. Clapton, but seems to sum up high quality DG investing.
David Crosetti profile picture
I'm cherry picking here, but I want to show you that dividend growth is not everything. Take Sysco (NYSE:SYY), a strong dividend aristocrat. This is a strong and diversified company increasing its dividend payment since the 70s. But over the past 10 years, the stock value barely moved leaving investors with the dividend growth and… nothing else.

You are making the same mistake that so many investors seem to make, over and over. You have selected a 10 year window of time and pointed out that the price of SYY did not change very much over those 10 years.

You are saying that if someone purchased SYY in 2005 or 2015 that they would be basically purchasing their shares at the same price in both periods.

But, here's your mistake.

You failed to notice that the price of SYY in 2009 represented a 10 year low. If you looked at the fundamentals for the company in 2009, you would have discovered that SYY might have been a stock that you wanted to buy.

From Feb 2009-Nov 2014 SYY returned an annualized 14.6% to investors. Not exactly the "best investment" during that time period, but a fair one for those who wanted to purchase this company with 4.15% yield point back in 2009--the highest yield point in the history of the company.
Michael Thomas profile picture
"From Feb 2009-Nov 2014 SYY returned an annualized 14.6% to investors." - Now who's cherry picking?
Paul Wagner profile picture
Michael...did you read the first 3 words of David's comment?
Michael Thomas profile picture
@Paul - Yes I did. He's quoting the author. Not his words...
Paul Wagner profile picture
"On the other hand, I recently sold MCD and BNS.TO because I was disappointed in their efforts to grow their businesses."

Fine, but KO has been growing much more slowly than BNS.TO.
Michael Thomas profile picture
I have a difficult believing the first graph provided by Ned Davis Research. The top 20% of dividend payers give an annual return of -1.2%, yet dividend payers and growers beat everything else. Seems rather fishy...also contradictory to a widely held view that higher yield outperforms over the long term.
Swisser999 profile picture
Dividend growth stocks make up the core of my portfolio and help me sleep at night. Few things in life are as rewarding as getting a raise year after year from my stocks. I get better raises than when I was working!
Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!

Related Stocks

SymbolLast Price% Chg
Sysco Corporation
Apple Inc.

Related Analysis

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.