Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Kraft Foods Group Inc (KRFT), General Electric Company (GE): The Ultimate Dividend Growth Portfolio

Dividend growth investing has become popular lately, and for good reason. The idea behind this method is to invest in companies that are likely to have strong dividend growth in the future, thus continually increasing the amount of income generated from your portfolio. This income can then be reinvested into more dividend growth stocks, creating even more income. Dividend growth investing is like compounding on steroids. Imagine you have a portfolio which generates $1,000 of dividend income each year, and that the dividends grow at 8% annually. You could either keep those dividends or reinvest them into more dividend growth stocks. What’s the difference? See the chart below.

Created with

If you don’t reinvest your dividends over 40 years then your income stream grows to about $20,000 annually, all through the magic of compounding. But if you reinvest those dividends each year in equivalent dividend growth stocks, your income stream grows to an astounding $58,500 annually–almost three times as much! Clearly there’s an advantage to dividend growth investing.

Finding dividend growth stocks

What makes a good dividend growth stock? Well, obviously the dividend needs to be growing. But yield is important too, and just because a dividend has been growing fast doesn’t justify a sub par dividend yield. The lower the yield the higher the expected growth rate needs to be. Here are some general guidelines that I use to look for dividend growth stocks:

Dividend yield Required 10-year annual dividend growth rate
2% 14%
2.5% 11.5%
3% 9%
3.5% 7%
4% 5.5%
5 % 2.9%
6% 1.9%

If you’re curious where these numbers come from, they’re based on a simple dividend discount model calculation, which you can easily do using my dividend valuation tool.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.