The reason I like dividend growth companies is that they can provide much higher dividend increases than the rate of inflation. You may start with a lower dividend, but over time you collect much more in dividends that if you go for a higher dividend and low or no dividend growth. This is the joy you get from owning dividend growth companies.
A great time to buy such companies is when the current dividend yield is relatively high historically. (And, that is why I just bought some Canadian Natural Resources (TSX-CNQ) stock. I was introduced to dividend growth stocks by an early blogger named Mike Higgs.
What I have gone for is a reasonable income that increases faster than inflation rather than a high income that is relatively stable. Every time there is a recession, dividend increases slow down, sometimes quite a bit. Some companies cut or drop dividends, some keep them the same and other will raise them. Overall, in recessions dividend increases will slow. So I went for faster than inflation over all dividend increases for normal times.
I have written about this subject before in Dividend Growth Companies item in which I compare and contrast Chesswood Group (TSX-CHW) and Stella Jones Inc. (TSX-SJ). Chesswood has a high dividend and Stella Jones is a dividend growth company.
I have also talked about the types of Dividend Stocks. I also did another article on why I liked SNC-Lavalin a Dividend Growth Stock.
I have also wrote about the Dividend Yields on Original Investments. Nothing beats Canadian Banks on good yields and good growth in dividends.
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
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