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What Is Dividend Growth Investing And How to Get Started

dividend growth investing

Dividend investing includes investing in shares that pay dividends. Dividends is usually a supply of revenue for buyers, they will additionally indicate strong, growing corporations whose inventory may represent a strong investment.

And dividends have been a well-liked funding technique for many years – but it may be arduous to do the analysis, know what corporations to spend money on, or what products may be worthwhile.

Before moving into what dividend investing is and why it is a sensible strategy, you must know there’s just one robo-advisor conducive to choosing individual, dividend-paying shares, and that’s Emperor Investments. We have partnered with Emperor Investments that will help you study more about dividend investing. I evaluation them right here, however advocate you verify them out yourself. Take a look at Emperor Investments here>>

What Are Dividends?

Dividends are funds to shareholders of document as a specified date which might be approved by the company’s board of administrators. Dividends are a way of returning a few of the company’s income back to shareholders.

Dividends are often paid in money and are usually expressed as an quantity per share. For example, a dividend payout is perhaps $1 per share. Dividends may be paid at no matter interval the corporate’s board decides. Quarterly payments are widespread, especially amongst established corporations.

Apart from cash funds, inventory dividends may be made. Beneath this state of affairs, shareholders will receive a delegated number of shares for every share owned.

Dividends Are a Vital Element of Returns

Dividends might sound insignificant at first glance, but traditionally they’ve made up a big a part of the full return of the S&P 500¹ and different main stock market indexes.

A research of the impression of dividends on the S&P 500 index from December of 1960 via December of 2018 confirmed that 82% of the index’s complete return was as a consequence of reinvested dividends and the facility of compounding over this 50-year time horizon.

They assumed a hypothetical² investor had invested $10,000 into the index on December 1, 1960 (word you can’t truly spend money on the S&P 500 index, although there are numerous ETFs and mutual funds³ that try to duplicate the performance of the index).

If all dividends acquired have been reinvested and allowed to compound over time, the hypothetical $10,000 funding would have grown to $2,459,158 via December 20, 2018.

With out the reinvestment of dividends, the $10,000 would have grown to only $431,397 over the roughly 50-year time horizon based mostly solely on worth appreciation.

Wanting on the proportion contributions of dividends to the index’s complete return by decade reinforces the importance of dividends.

Proportion of Complete Return — Worth Appreciation

Proportion of Complete Return — Dividends

*The last decade of the 2000s saw a unfavourable complete return for the S&P 500 index.

Definitely, the pendulum has swung forwards and backwards between dividends and worth appreciation in significance as a supply of return on the shares within the S&P 500 over totally different durations of time.

For example, the many years of the 1980s and 1990s noticed excessive levels of worth appreciation in a variety of stocks. The tables have been turned in the course of the 1970s and the 1940s. Over the time coated by this research, dividends made up over 40% of the full return of the index.

What’s nice about Emperor Investments, in case you determine to create your dividend portfolio with them, is that every particular person inventory is vetted by skilled human analysts so that you aren’t doing this utterly alone. Visit Emperor Investments here >>

Dividend Yield Versus Dividend Progress

Dividend buyers sometimes look to dividend shares for one or both of two causes.

Dividend Yield

Dividend yield is calculated by dividing the annualized dividend payout of the stock by the current share worth. For instance, a inventory that pays an annualized dividend of $2 per share with a present share worth of $50 would have a dividend yield of 4%. If the worth rose to $56 per share, the dividend yield would drop to roughly three.6%. The payout didn’t change, however the improve in the stock’s worth would serve to lower the present dividend yield.

The annualized dividend payout that is usually used is the newest quarterly payout occasions four. The dividend yield will usually change day by day with the worth actions of the stock.

A excessive dividend yield could be a perform of both an increased payout and/or a decline within the inventory’s worth.

In reaching for stocks with high yields, it’s essential for buyers to look beyond the dividend yield to ensure they perceive why the yield is high and if the dividend payout is sustainable.

One sector whose stock typically has a excessive yield is utilities. They’ve secure cash flows and sometimes have a close to monopoly in their region. While the share worth might not transfer much until there’s some kind of abnormal occasion, the dividend payouts are often pretty secure.

This isn’t the case with all stocks with a high dividend yield. Retailer Macy’s (ticker M) just lately had the very best dividend yield of all shares in the S&P 500. The dividend per share has remained constant at $1.51 for the past three years. Yet the worth per share of the stock has declined from a high of over $67 per share at the finish of July 2015 to a current worth per share of $15.54. Macy’s may symbolize a superb buy at its present worth and yield, but definitely has disillusioned long-time shareholders.

Dividend Progress

Another take on dividend investing is looking for the shares of corporations with a strong document of accelerating their dividend payout per share on an annual basis. Corporations that do that are usually well-managed and financially sound.

The power to maintain and improve the dividend payout annually is an indication that the company is growing its bottom line and is generating strong cash flows.

Whether or not you spend money on corporations with a excessive yield or those with rising payouts, dividend investing is usually a strong strategy to generate a stream of revenue out of your portfolio. This is perhaps a source of passive revenue as you strategy retirement, for example.

On the Emperor Funding platform, there are tools so you possibly can venture what your investments will grow to after a set time interval, and modify your inventory decide accordingly to succeed in the passive revenue you want. Visit Emperor Investmen​​ts right here >>

S&P 500 Dividend Aristocrats

Prime examples of dividend progress are the S&P 500 Dividend Aristocrats shares. Dividend Aristocrats are outlined as shares which might be included within the S&P 500 index and who’ve elevated their dividend payout at the least as soon as annually for a minimum of 25 consecutive years. The primary record was revealed in 1989 and included 26 corporations.

In response to the location Dividend Value Builder, there are presently 57 corporations that qualify as Dividend Aristocrats as of 2019.

Should you stop and think about this, the power to even pay a dividend for 25 consecutive years indicates a company with robust earnings and money flows. Growing the dividend payout for 25 consecutive years or more is an indication of a company that is worthwhile, that’s rising, has strong cash flows, and is sort of possible a well-managed group.

A take a look at the current record of Dividend Aristocrats reveals a who’s who of prime corporations, together with numerous family names.

Dover Company (ticker image DOV) leads the record with 63 consecutive years of a minimum of one annual dividend improve. Dover is a U.S. diversified manufacturer that makes merchandise divided into three business models: engineered methods, fluids, and refrigeration and meals gear.

Three corporations are tied for second place with 62 consecutive years with at the very least one dividend improve annually:

  • Emerson Electrical (ticker EMR) is a U.S. multinational and member of the Fortune 500 record. The company manufactures merchandise and supplies engineering providers for a wide range of consumers throughout the buyer, business, and industrial sectors.
  • Real Elements Firm (ticker GPC) is engaged in the distribution of automotive alternative elements, industrial alternative elements, workplace products, and electrical materials.
  • Procter & Gamble (ticker PG) is a serious shopper products company with such well-known brand names in areas reminiscent of baby care, material care, grooming, hair care, shaving, and a number of others.

Rounding out the highest 5 Dividend Aristocrats is another well-known model, 3M (ticker MMM) with 60 consecutive years of a minimum of one annual improve of their dividend payout. They sell any variety of shopper and workplace merchandise resembling Publish-it Notes. Beyond this product, they offer products within the areas of employee safety, industrial products, healthcare, and shopper products.

Ways to Spend money on Dividend Stocks

For buyers who’re all for dividend investing, there are a selection of options to think about. Observe that none of those are mutually unique, buyers can mix and match any of those into their general investing strategy.

Particular person Dividend-Paying Shares

Buyers can purchase particular person dividend-paying shares. Whether or not or not this can be a good strategy will rely upon every investor’s individual state of affairs and their investment strategy.

A key consideration is whether or not you will be able to construct a diversified portfolio of particular person shares going this route.

There are lots of buyers who look to build a stream of revenue by constructing a portfolio of particular person dividend-paying names. A warning to remember is that even dividend-paying shares are prone to actions within the stock market, although many are much less risky than the market as an entire.

So, let’s say you open an account with Emperor Investments to construct your dividend-paying inventory place, I’d also advocate investing in different asset courses or mutual funds, to diversify your portfolio. 

Mutual Funds and ETFs

There are a selection of mutual funds and ETFs that target dividend shares either from a dividend progress perspective or a yield focus. Some examples embrace the next:

  • Vanguard Excessive Dividend Yield Index Fund (ticker VHDYX) makes an attempt to duplicate the performance of the FTSE Excessive Dividend Yield Index. The businesses held in the fund often supply higher-than-average dividend yields. There’s also an ETF model of the fund. The current SEC yield of the fund was three.31% versus a yield of underneath for the S&P 500 index.
  • Vanguard Dividend Appreciation ETF (ticker VIG) consists of corporations which have increased their dividend payout yearly for no less than 10 consecutive years. This fund is concentrated on dividend progress versus yield progress. The fund can also be obtainable as a mutual fund as nicely.

There are several funds and ETFs that target the S&P 500 Dividend Aristocrats in some type. One example is the next:

  • ProShares S&P 500 Dividend Aristocrats ETF (ticker NOBL) invests in an index comprised of 40 S&P stocks. The fund equally weights these 40 holdings, rebalancing the fund four occasions through the yr. The composition of the 40 shares is reviewed — and if wanted, revised — as soon as per yr.

Construct Your Personal ETF by way of a Platform Like Emperor

Emperor Investments is a superb place to construct your personal ETF of dividend-paying stocks. Most robo-advisors have preset portfolios that the investor is pressured to purchase without the option to customize. 

With Emperor, they take a look at your objectives after which construct a portfolio of shares with a history of uninterrupted dividends, and ones which were pre-vetted by their staff of execs. The platform combines their very own professional research on prime of data you provide to construct a portfolio of top of the range shares for you.

Get began with Emperor here.


Dividends are an essential element of return for stocks. Corporations that may proceed to pay dividends annually could be wonderful investments, especially those which are capable of persistently improve their payout ranges.

It is vital for buyers to know the underlying financials of any stock they is perhaps considering, serving to be sure that the corporate is a strong investment for them. Ensure the dividend is sustainable. It’s also essential to comprehend that even dividend-paying shares can get hit when the stock market corrects itself.

Mutual funds and ETFs that target dividends is usually a good various. Ensure that you perceive the fund’s aims and its bills. Be sure that these goals are constant together with your investing objectives.

Platforms like Emperor are another various for dividend investing that is value testing as properly.


¹ The Normal & Poor’s 500 (S&P 500) is an unmanaged group of securities thought-about to be representative of the inventory market typically.  It’s a market value weighted index with each stock’s weight in the index proportionate to its market worth. Indices are unmanaged and buyers can’t invest immediately in an index.

² Hypothetical example(s) are for illustrative purposes solely and usually are not meant to symbolize the past or future efficiency of any specific investment.

³ Mutual Funds and Change Traded Funds (ETF’s) are bought by prospectus. Please contemplate the funding goals, dangers, fees, and bills rigorously earlier than investing. The prospectus, which incorporates this and other information about the funding firm, might be obtained from the Fund Firm or your financial professional. Remember to read the prospectus rigorously earlier than deciding whether or not to take a position.