Div Tip #16: Ride the slow growth.

Dividend Tip Jar

Dividend growth stocks (DGS) are deceptively powerful.  They’re the workhorse in a Dividend Farmer’s portfolio.  Realizing the potential of a dividend grower takes time, but the juice is worth the squeeze.

Assume a dividend stock pays 4% and has maintained a steady 2% growth rate for an extended period; similar to many Dividend Champions.  If that stock is held for the long run the dividend payout at 15 years will be nearly 35% higher than it was at purchase.  After 20 years it will be almost 49% higher and at 30 years the dividend payout will be more than 81% higher than it was when the stock was first acquired.  An investor has to hold onto the stock, remain patient, and monitor progress.

Investors may not be guaranteed a sustained 30-year run of dividend growth – even at 2% annually.  However, consider the value appreciation of a given stock may be no better over that period; and could be worse with no dividend payment to cushion inevitable downturns. 

Choosing between a lengthy record of dividend growth and the financial power it conveys vs the volatility of alternatives is easy for a Dividend Farmer.  It pays to ride the slow growth nearly every time.