The Evidence for Dividend Growth Investing
Money and Finance

The Evidence for Dividend Growth Investing


This following post is written by Ben Reynolds, who runs the Sure Dividend site. Sure Dividend focuses on high quality dividend growth stocks suitable for long-term investing.

Dividend growth stocks are an excellent vehicle to build passive income over time. The idea of owning businesses that pay you more money year after year has a certain appeal to those in pursuit of passive income. Not only do dividend growth stocks give you a raise year after year, they have also historically outperformed the market. The Dividend Aristocrat Index is made up of businesses that have raised their dividends for 25+ consecutive years. The Dividend Aristocrat index has outperformed the S&P500 by 2.41 percentage points per year over the last decade.
Source: S&P500 Dividend Aristocrats Fact Sheet

Dividend Aristocrats & Quality

The Dividend Aristocrat index is full of high quality businesses with a long history of success. Some examples are Coca-Cola (KO), Wal-Mart (WMT), PepsiCo (PEP), 3M (MMM), and Johnson & Johnson (JNJ). There are 54 businesses in the Dividend Aristocrats Index. You can download a full list of current Dividend Aristocrats sorted by dividend yield, growth rate, and P/E ratio right here. Not only do Dividend Aristocrats have a long history of profitable growth, they also tend to have higher profitability on average. The average return on assets (ROA) for the S&P500 is 7.23%, compared to 9.58% for the average Dividend Aristocrat stock.

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