Dividend growth investing (DGI), if done correctly, is a very wonderful and self-reinforcing strategy. The idea is pretty simple — if one buys stocks of high-quality companies which are increasing dividend at a rate which is higher than the inflation, then one hopes to increase his buying power over time. The compounding works fantastically in these cases.
Furthermore, it is quite easy to follow the strategy and one can define a good criteria of when to buy or sell a stock. Ideally, for a dividend growth stock the time to sell is never. But sometimes a company's business may face adversities which might be difficult to fix. In these cases, DGI offers a simple criteria to exit the stock — sell if the growth in dividend is less than the inflation. Simpler still, if the company does not increase its dividend in a particular fiscal year then you sell and re-deploy the cash.
Source: Guru Focus
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Posted by D4L | Wednesday, March 20, 2013 | ArticleLinks | 0 comments »________________________________________________________________
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