As you may already know, dividend growth investing is an investment strategy that involves investing in stocks that pay increasing dividends over time. This strategy has several benefits that we will be discussing today.

1. Investment Success That Is Independent From Stock Prices: Unlike other investment strategies that rely solely on capital appreciation, dividend growth investing provides a reliable income regardless of what the stock prices are doing at any given time. Successful dividend growth investing requires the underlying operations of the company to generate reliable cash flows that cover dividend payments comfortably and grow over time.
2. Total Return Potential: Companies that pay increasing dividends over time are generally financially stable and have a track record of consistent growth. These companies are also likely to have a competitive advantage in their industry, which can lead to long-term growth and capital appreciation.
3. Compounding via Dividend Re-Investment: A key component in dividend growth investing is the power of compound dividends. When you reinvest your dividends, your “money earned from investment” purchases more shares of the stock, which in turn generates even more dividends. Over time, the compounding effect coupled with dividend raises can lead to substantial growth in your income.
4. Inflation Hedge: We look for companies that increase their dividends year after year without fail. As these companies raise their dividends, the income generated from your investments grows at a rate that can potentially outpace inflation. This allows you to maintain or even increase your purchasing power as the cost of living rises.
5. Lower Volatility. Companies that pay increasing dividends over time tend to be financially stable and have a proven track record of growth and reliability. This stability can help to reduce the overall volatility of your portfolio, which can be particularly beneficial during times of market turbulence.
6. Psychological Advantages: It’s psychologically easier to stick to a dividend investment strategy in all economic and stock market conditions. Since dividend investors are getting cash dividend returns even during economic uncertainty and stock market crashes – it incentivises investors to keep hold of their shares and not sell at the worst possible time. They are being paid to wait out the storm. As re-investment of dividends is executed at higher yields and better valuations during market downturns, dividend investors are benefiting from declining stock prices.

In conclusion, dividend growth investing offers several benefits including a steady stream of income, long-term growth potential, a hedge against inflation, reduced volatility, and reduced investment risk. It also incentivises good, long-term mined investor behaviour from investors which will help them avoid major pitfalls, such as selling in panic when stock prices decline. As you continue your journey in dividend growth investing, keep these benefits in mind as they will help you achieve your long-term financial goals.