Dividend growth stocks with a long history of increasing payouts are often considered top-tier investments. These stocks tend to have higher valuations because of their strong management, operational excellence, financial stability, and discipline. If you’re building a successful dividend growth portfolio, including at least one of these “Dividend Kings”—stocks that have raised dividends for 50 consecutive years—is essential.
Investors focused on dividend growth are different from those chasing high-valued tech stocks like Facebook, Apple, Amazon, Netflix, and Google. While the latter reinvest all their cash flow into the business, except for Apple, dividend growth investors prefer companies with reliable dividend histories and rewarding shareholder strategies. It’s wise to have at least three Dividend Kings in your portfolio.
A company can either reinvest its earnings or issue dividends to shareholders. Dividend investing isn’t about getting rich quickly; it’s a long-term strategy for financial independence, much like the compounded returns seen in historical cases like Coca-Cola’s long-term investing story.
A “Dividend Aristocrat” is a stock that has increased dividends for at least 25 years and meets certain criteria to remain in the S&P 500. These stocks usually come with premium valuations because of their consistent performance over time. Unlike many S&P 500 stocks with high dividend yields, Aristocrats maintain their long-term growth track record.
Dividend Kings go a step further, maintaining dividend increases for 50 consecutive years, a testament to their consistent performance and shareholder returns. For those who prefer a more passive investment style, ETFs focusing on Dividend Aristocrats offer a convenient and diversified option. ETFs like ProShares S&P 500 Dividend Aristocrats and SPDR S&P Dividend ETF allow investors to steadily build their dividend portfolios without the need for frequent monitoring.
Investing in Dividend Kings offers a balance of stability and growth potential. By investing in stocks with a proven history of dividend increases, investors can capitalize on both reliable income and growth. It’s an effective way to leverage historical success for future gains through compound interest, especially when using fractional share investments.
To invest in Dividend Kings, it’s crucial to know which stocks qualify. These companies tend to have strong brand recognition and widespread daily use, making them leaders in their industries.
At the moment, Target Corporation, Dover Corporation, and Stanley Black & Decker are considered undervalued Dividend Kings worth adding to your dividend growth portfolio. While these stocks may not have high yields, their ongoing earnings growth makes them solid investments.
Identifying the next wave of Dividend Kings requires tools and criteria for assessing companies that have shown dividend growth potential. Tools like Google Finance, Seeking Alpha, and Personal Capital, among others, provide resources for evaluating stocks. These platforms help ensure you do your homework for constructing a robust dividend growth portfolio.
Finding future Dividend Kings involves analyzing a company’s shareholder policies, financial health, management, operational success, and business model. Consistency in these areas often indicates a company poised for long-term dividend growth, making it a viable candidate for a dividend-focused portfolio.
Do you own any Dividend Kings? We’d love to hear your thoughts on dividend growth investing. Feel free to share your experiences and insights.