The answer to this question may depend a lot on your point of view. Today the market is up, but it has been going down quite a bit lately. I still think I am making money. My dividend income is probably proof of that.
What I am aiming for is 3.5% dividend yield with 10% dividend increases each year. Of course, you are not going to get the same increase each year, but you can look at averages and median values. I try to meet my goals by having a mix of high yield stocks with low dividend increases (like REITs) and low dividend yields and higher dividend increases. I also have stocks with dividend yields in the mid-range.
I was talking today about buying a stock that has a low dividend yield, but good dividend increases over time. This stock was Richelieu Hardware Ltd. (TSX-RCH). See
So far this year, my dividend yield on actual and expected income is running at 3.68%. My dividends have already gone up 7.66% this year. Last year they increased by 9.23%. My 5 year median dividend increase is 11.35%. Dividend increases range from the lowest of 5.29% in 2010 and the highest of 23.21% in 2007.
For Richelieu that I was reviewing yesterday and today, the 5 and 10 year growth in dividends of at 12.9% and 16.7% per year, respectively does not tell the whole story. In 2006, dividends increased 20%; in 2007, they increased 16.7%; in 2008, they increased 14.8%; in 2009, the increase was 0%; in 2010, it was 12.5% and 2010 it was 22.2%.
The lowest dividend increases always comes a couple of years after the bear market and in 2010 it was right on time as the bear was in 2008 and the lowest increase was in 2010. This is very typical.