What is dividend growth investing? Dividend growth investing is a popular investment
strategy that involves buying shares in a company that consistently pays good dividends.
These stocks generally perform better than the market in the longterm.
Are you reconsidering your financial investments? Thinking about new investment strategies?
Keep reading to get some helpful tips on dividend growth investing and make the right financial moves to gain wealth for you and your family.
Tips on Dividend Growth Investing Are you working with a financial advisory firm? Are you thinking of becoming a DIY investor? If so, you came to the right place. Let's take a look at some helpful tips for dividend growth investing.
1
. Do Your Homework Look at the company's dividend growth history. Look for companies that grow their dividends in a sustainable way.
Don't go by feelings to buy stocks. Use data and research when making choices.
Look at balance sheets. Observe the company's interest coverage ratio, the current ratio, and the debt-to-equity ratio. If those ratios are strong, it is likely that the company's dividends are solid.
Choose stable companies. Companies with a good credit rating pose the least risk.
Look for companies that have a long history of raising their dividends. Check out
S&P 500 Dividend Aristocrat list for the companies that have dividend increases each year.
2. What is the Company's Payout Ratio? The payout ratio is the dividend as a percentage of the company's earnings. You want to choose companies with modest payout ratios.
You want to find that sweet spot somewhere between a low payout ratio and a high payout ratio.
Too low of a payout ratio might be a sign that the company doesn't make dividends a priority.
Another reason could be that it's not confident in their earnings and don't want to risk a larger dividend.
A too-high payout ratio may indicate the dividend is at risk or the company is making sacrifices in regards to growing the company in order to pay out dividends.
3. Reinvest Dividends If you start investing early, that is, before you actually need the money for your living expenses, reinvest your dividends.
By reinvesting your dividends, you end up with a much higher share count. This will result in excess wealth from capital gains. You'll begin a cycle of dividends from shares purchased with your initial dividends.
You'll get the most bang for your buck by investing in a slower-growing company when reinvesting dividends. This is a better investment strategy.
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Make Your Money Work For You Now that you've learned some tips on dividend growth investing, you can make your money work for you. Did you find this article helpful? Bookmark our site for easy access to all of our informative articles. Our goal is to 'share the knowledge'.