So when stock prices start to fall, as they have this week, dividend growth investors like myself start to get excited. Why? Because when prices are down, yields are up. And for dividend growth investors yield is what matters most. They also know that the price of the stock doesn't affect the dividend because the dividend is based on, and paid each quarter out of, the company's earnings - and earnings aren't affected by the stock price's movement up or down.
In fact, when dividends remain steady or improve while stock prices fall, dividend yields will increases proportionally. And dividend yield is where the dividend growth investors are focused when it comes to buying decisions.
Dividend Growth Investors also keep a keen eye on the company's dividend growth rate as well as the dividend payout ratio, but the dividend yield is usually the most seductive.
Successful Dividend Growth Investors have learned, over the years, how to discover those unique companies that continually increase their dividends over a series of several years. They usually have their own individual rules on just how many years are needed, what’s the minimum acceptable yield that's needed, and what the minimum growth rate is needed in order to initiate a buy. So when the market falls, as it has for the last few days, dividend growth investors dust off their lists, check their accounts for excess funds, and get ready to go on a shopping spree.
A falling market doesn't last for long and when it does, it's definitely a great time to be a Dividend Growth Investor.