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Dividend Growth Investing Is About Total Returns

growthIt is close of five year now that I have been a long term buy and hold, and dividend growth focused investor. When I meet friends, acquaintances, or colleagues, on many occasions the discussion starts from what’s market doing today and steers towards trading/investing is nothing but a poker game. I get a sense that many of these folks think that buying (and selling) stocks is just a gamble of some kind. Irrespective of this, I believe both, trading and investing, have their own set of pros and cons depending upon what context an individual is looking at it. In the end, both trading and investing is done to make money. Some use approach of capital appreciation, some use dividend income, some do trades to generate income. The key is to have a plan and execute it with consistent results.

When it comes to dividend investing, many individuals think of high yields (perhaps Cramerica syndrome!). It shows lack of patience and tendency to read too much into the business media. They do not understand dividend growth and sustainability.

There are two very significant aspects that investors need to understand about dividend growth investing and sustainability. These are (a) quality of dividends; and (b) potential for capital appreciation.

Thus, the key is to invest in companies which can grow its operating cash flow with consistency and can sustain it. A company that consistently generates cash is likely have to less downside risk. Even if they do get affected by market downturns, such companies experience less downward pressure. In addition, the continued dividends keep adding to the total returns. Examples of such companies are Proctor and Gamble (PG), Johnson and Johnson (JNJ), Becton, Dickinson and Company (BDX), T. Rowe Price Group (TROW), Sysco Corporation (SYS), Emerson Electric Company (EMR), Dover Corporation (DOV), and Jonn Wiley Sons (JW.A).


Dividend investing does not mean focus on high yield only. It is about consistency and sustainability which inherently focuses on total returns.