Achieving long-term success as a dividend growth investor implies a long-term buy-and-hold strategy. The reasons why are simple and straightforward. The primary objective of a committed dividend growth investor is to achieve a growing dividend income stream. This primary objective further implies achieving an increasing level of income that can fight inflation while simultaneously being capable of raising their standard of living over time.
However, you cannot just buy-and-hold any stock; you must buy-and-hold a company that is capable of achieving the long-term results commensurate with meeting your objectives. As I stated many times, it is a market of stocks and not a stock market. Consequently, not every dividend paying stock is a keeper, and successful dividend growth investing implies investing in keepers. Stated more simply, this further implies investing in great businesses - not stocks. The most successful dividend growth investors position themselves as shareholder partners in excellent dividend paying businesses.
The ideal excellent dividend paying business is represented as a company that has consistently produced growing earnings and dividends over time, and the longer - the better. This clearly explains the attraction to premier blue-chip dividend paying stocks found in the Dividend Aristocrats or the Dividend Champions and Dividend Contenders found in David Fish’s CCC lists. To make these lists, these companies must have proven records of increasing their dividends for at least 10 consecutive years (Dividend Contenders), with the premier companies (Dividend Aristocrats and Champions) increasing their dividends for 25 consecutive years or longer.
This is important because it can be all too easy to become attracted to a dividend paying stock simply based on current statistics. Later I will present an example of a dividend paying stock with a very high current dividend yield and an extremely low current P/E ratio. Statistics like those can easily lure the unsuspecting dividend growth investor into investing in a stock that might not be capable of achieving the goals I’ve described above.