Key Takeaways
- 1Dividend growth stocks raise payouts annually, compounding your income over time
- 2A 2% yield growing at 10% annually becomes a 13%+ yield on cost in 20 years
- 3Dividend Aristocrats (25+ years of increases) and Kings (50+ years) are the gold standard
- 4Our profitability and stability factors naturally identify sustainable dividend growers
#What Is Dividend Growth Investing?
Dividend growth investing prioritizes companies that consistently increase their dividend payments, rather than simply chasing the highest current yield.
The power lies in compounding:
| Years Held | Starting 2% Yield (10% Annual Growth) |
|---|---|
| Year 1 | 2.0% |
| Year 5 | 3.2% |
| Year 10 | 5.2% |
| Year 15 | 8.4% |
| Year 20 | 13.4% |
| Year 25 | 21.7% |
#Characteristics of Great Dividend Growers
1. Strong Free Cash Flow Generation Dividends are paid from cash, not accounting earnings.
2. Moderate Payout Ratios A payout ratio of 40-60% leaves room for both dividend increases and business reinvestment.
3. High Return on Equity ROE above 15% enables simultaneous business and dividend growth.
4. Durable Competitive Advantages 20+ year dividend growth requires moats competitors cannot easily replicate.
#Dividend Aristocrats and Kings
Dividend Aristocrats
S&P 500 companies with 25+ consecutive years of dividend increases. Approximately 65 Aristocrats across sectors like consumer staples, healthcare, and industrials.
Dividend Kings
Companies with 50+ consecutive years of dividend increases — the most exclusive group in investing.
#Dividend Growth by Sector
| Sector | Typical Growth Rate | Best For |
|---|---|---|
| Healthcare | 8-15% | Strong growth + moderate yields |
| Technology | 10-20% | Newer dividend payers, rapid growth |
| Industrials | 6-10% | Steady, reliable growth |
| Consumer Staples | 4-8% | Ultra-reliable, slower growth |
| Financials | 8-15% | Cyclical but strong growth phases |
| Utilities | 3-6% | Highest yields, slowest growth |
#How to Use Our Rankings
- Profitability — Companies that can afford growing dividends
- Stability — Companies likely to maintain dividends through downturns
- Value — Avoid overpaying for dividend stocks
Last updated: February 10, 2026