This can be done quite easily by any investor since the research and the lists are posted all over the internet. The lists are usually made up of companies that pay consistent and improving dividends over different periods of time. Some of the most popular lists are the two that identify the Dividend Kings and the Dividend Aristocrats. These two lists are extremely popular these days primarily because all the hard work has already been done by other investors who have simply posted that information out there for everyone to see.
In analyzing any company from a dividend growth perspective, it's helpful to identify whether the rate of growth in the dividend is greater than the current and expected rate of inflation so that the investor's purchasing power will increase over time. This sounds important, simple and obvious, but most things in life are more difficult than they appear at first (usually due to expectations and assumptions).
Assuming that an investor has his entire life in front of him, or he is buying a stock that will eventually be handed down through the generations, the higher the sequential rate of dividend growth for a given company the better, regardless of the current yield. Most junior high school students can calculate the point at which the dividends on a high growth rate, low yield stock will surpass the dividends on a low growth rate, high yield stock. It's just a simple math problem. It may end up taking a few years but the higher dividend growth rate will always result in a larger dividend payout over time.
If your intent is to live forever, or to simply pass along all of your positions to your descendants, you needn't worry about the price you may end up paying for any given stock. You also don't have to worry the stock's current yield because regardless of whether you may or may not have gotten the best bargain on the stock of the company you just bought, in the end you'll have a larger stream of dividend income distributed to you than if you had bought a stock with a lower dividend growth rate. Be assured that eventually you, your children or your grandchildren will be better off having bought the company with the highest dividend growth rate than the one with the lower dividend growth rate.
So the obvious questions that immediately fall out of the above discussion are "Why analyze companies at all? Why not just buy the stock with the highest rate of dividend growth?" These are great questions. Many investors ignore all the research and do exactly that. For those who have the money to invest when they are young adults and end up living into their 90s, it's been an effective strategy and one that has built wealth and income beyond those investor's wildest dreams.
For the rest of us, however, this strategy just won't work. Buying stocks that are overpriced will create a portfolio that goes nowhere fast for years. It will take too many years, and sometimes decades, to overcome those bad entries into the market. What we need to do is find those companies that have a high rate of dividend growth and then determine where the best entry point occurs. It's those great entry points that give investors the highest starting dividend income that immediately starts to compound.
Below I've listed six companies that have relatively high dividend growth rates, nice annual dividend yields, reasonable price per earnings ratios, and relatively low payout ratios that will allow those companies to continue those dividend to continue and increase into the future. I've also included a four month daily price chart which includes the MACD Histogram in the background for visual coordination. As I have mentioned before, the MACD is my favorite confirming momentum indicator but I do use others as well.
Hopefully the information below will provide a few ideas that will drive other investors to do additional research into the fundamentals and technicals of these companies. There may just be a gem among these that can provide that desired financial freedom and security in the future.