Dividend Growth Investing Explained: Why I Prioritize Raises Over Current Yield

There's a split in this community between high-yield investors and dividend growth investors. I land firmly in the growth camp, and here's why.

The case for dividend growth stocks:

A stock yielding 2.5% today that raises its dividend 10% annually will yield 6.5% on your original cost basis in 10 years. Meanwhile, that 6% yielder with no growth is still at 6%—and may have cut it.

Companies that consistently raise dividends tend to be:

• Financially healthy (they can afford increases)

• Shareholder-friendly management

• Confident in future cash flows

• Often outperformers over long periods

Dividend Aristocrats—S&P 500 companies with 25+ consecutive years of dividend increases—have historically outperformed the broader market with lower volatility.

My criteria for dividend growth stocks:

• 5+ years of consecutive increases (10+ preferred)

• Payout ratio under 60% (room to keep raising)

• Revenue and earnings growing

• Debt manageable relative to cash flows

The tradeoff: lower income today for higher income tomorrow. If you need cash flow now, this approach requires patience.

Anyone else focused on dividend growth over current yield?