Dividend growth investing (DGI) focuses not on the highest current yield, but on companies with a history of consistently raising their dividend annually. A 3% yield today that grows 8% per year becomes a 6.5% yield on your original investment in 10 years โ automatically beating inflation with no action required.
The Dividend Aristocrats
S&P 500 companies that have raised dividends for 25+ consecutive years (66 companies as of 2025). Examples: Johnson & Johnson (62 years of increases), Procter & Gamble (68 years), Coca-Cola (62 years), 3M (65 years), Abbott Labs (53 years). These companies raised dividends through recessions, financial crises, pandemics, and wars. Their business models are extraordinary.
The Math of Dividend Growth
Buy 100 shares of JNJ at $150 ($15,000 investment). Current yield: 3.2% = $480/year. JNJ raises dividend approximately 6% per year. Year 5 yield on cost: 4.3%. Year 10 yield on cost: 5.7%. Year 20 yield on cost: 10.3%. After 20 years, your $15,000 investment pays you $1,545/year in dividends โ and the shares have likely tripled in price.
Starting a DGI Portfolio
Core holdings (60%): Dividend Aristocrats โ JNJ, PG, KO, MCD, MMM. Growth additions (30%): Companies in earlier stages of dividend growth with strong growth prospects โ MSFT, AAPL, V. High yield satellite (10%): O, MAIN, STAG for immediate income. Reinvest all dividends for the first 10+ years if you don’t need the income.
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