Stocks that do this are hard to find unless you know where to look. There are lists of stocks that have increased their dividends at least once per year for ten, twenty five and even fifty years and are usually referred to as Dividend Contenders, Dividend Aristocrats and Dividend Kings. As I’ve mentioned many times before I’m personally interested in the list of stocks that have increased their dividends each year for at least twenty five years. That list is called the Dividend Aristocrats. I also have a hot button at the top of this page that will take you to another page on my site which lists the current companies on the Dividend Aristocrats List. Each one of the companies on that list is a hot spot that will take you to Yahoo! Finance if you want to do further research on that company. These Dividend Aristocrat stocks generally don’t pay out large dividends when they’re first purchased but over time the dividend increases and obviously the yield on the original purchase increases also.
All this is well and good, but in order for companies to increase their dividends over time they obviously have to increase their earnings, since dividends are paid out of a company’s earnings. Likewise I would expect that if earnings and dividends are increasing, then sales should be increasing also. These three things together tell me whether a company is financially healthy or not and whether I should continue to hold these equities in my portfolio. For the most part sales will generally be more volatile than earnings and earnings will be more volatile than dividends, but all three should generally be moving in the same direction -- up. If they’re not, then sales will eventually affect earnings and dividends so I try to track all three of these things so I’m not surprised when and if dividends are ever stagnant or, even worse, reduced.
I prefer to receive dividends in the form of cash deposited into my account rather than immediately buying additional shares of the company simply because the price at the time the dividend is paid may not be the best time to buy that stock. I prefer to base my decisions on buying stock on a price chart which includes a few momentum indicators I like to use. More often than not the timing is better on a different stock so I use the dividends to buy something other than the stock that paid the dividend. At times, it's a new position altogether.
Eventually I hope to have sufficient dividend income to supplement whatever retirement I may get from my working career. And hopefully that income will continue to increase over time so that my purchasing power can be retained or increased over time. If done properly I believe this is an excellent investing plan.