Accumulative Dividend Growth
Understanding Accumulative Dividend Growth
When we look at dividend growth, we’re focusing on companies that not only pay dividends but also consistently increase their payout over time. Think of it like a snowball rolling downhill — as it rolls, it packs on more snow, growing larger. In the same way, some stocks add to their dividends, allowing your investment to potentially grow through both the value of the shares and the increasing dividend payments.
Here’s a simple truth: companies that have a history of dividend growth often signal financial health and stability. For instance, a firm with a strong balance sheet and excess cash is more likely to increase its dividends. This can be reflected in the percentage increase in dividends year over year.
Now, let’s illustrate this with a table:
| Year | Dividend per Share | Year-Over-Year Growth |
|---|---|---|
| 1 | $1.00 | – |
| 2 | $1.05 | 5% |
| 3 | $1.10 | 4.8% |
| 4 | $1.20 | 9.1% |
| 5 | $1.33 | 10.8% |
From the table, we see that dividends don’t just increase; their rate of increase can grow as well. This is what creates an accumulative effect on your portfolio’s dividend income.
Remember, while companies can’t promise future increases, those with persistent dividend growth often aim to maintain a pattern. This speaks to their confidence in ongoing profitability and commitment to shareholder value. It’s our job, as your portfolio managers, to identify these opportunities for you.