Understanding the Dividend Growth Indicator
The Dividend Growth indicator measures how consistently and quickly a company's dividend has grown. Growing dividends protect against inflation and compound wealth over time.
What It Measures
- Growth Streak: Consecutive years of dividend increases (not just payments)
- 5-Year CAGR: Compound annual growth rate of the dividend
How to Read the Status
| Status | Criteria | Meaning |
|---|---|---|
| 🟢 Good | ≥ 10y streak OR CAGR ≥ 7% | Strong, consistent dividend growth |
| 🟡 Neutral | ≥ 5y streak OR CAGR ≥ 3% | Moderate growth history |
| 🔴 Bad | No consistent growth | Flat or declining dividend |
Why It Matters
A $1,000 investment yielding 3% with 7% annual dividend growth becomes a 6% yield on cost after 10 years. Growth protects purchasing power and accelerates compounding.
What to Do
- Good: Excellent for long-term income growth. Consider the Chowder Number for total return potential.
- Neutral: Growth exists but may not outpace inflation significantly.
- Bad: Better suited for current income than growth. Ensure yield compensates for lack of growth.