Dividend Growth Stocks May Be Overrated Investments

Let’s start with the conclusion. I suggest that, based on yield only, the income-oriented investor is probably better-off buying a security with a higher, static dividend than one with dividend-growth. Many prominent Seeking Alpha authors have identified that dividend growth securities provide superior long-term overall returns and I am not debating this. In fact; I follow a few of the dividend-growth supporters, and enjoy their thoughtful articles. This article is about dividend yield – not capital growth (for capital gains), or total return (yield plus capital growth); it is ONLY about dividend yield on the invested amount. Consider this analysis as though one is purchasing a Certificate of Deposit (CD) – for the Canadian readers, this is the equivalent of a Guaranteed Investment Certificate (GIC). This assumes that your goal is to receive 100% of your return as yield, with the return of your principle at the end of the... Read more