Recent Dividend Increases

Below you will find a list of publicly-traded companies, exchange traded funds (ETFs) and real-estate investment trusts (REITs) that have recently increased the amount of their dividend payments. Learn how to invest in stocks with increasing dividends.

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CompanyAnnouncement DateAmountPrevious AmountIncrease AmountYieldEx-DatePayable DateIndicator(s)
MGM Resorts International logo
MGM
MGM Resorts International
8/4/2021$0.0025$0.002025.00%0.03%9/15/2021News Coverage
Gap Up
BP logo
BP
BP
8/4/2021$0.3276$0.31504.00%5.0%8/12/20219/24/2021Earnings Report
Analyst Report
MFV
MFS Special Value Trust
8/4/2021$0.0463$0.04630.02%8.3%8/17/20218/31/2021News Coverage
Positive News
CIF
MFS Intermediate High Income Fund
8/4/2021$0.0194$0.01930.16%7.3%8/17/20218/31/2021Short Interest ↓
News Coverage
MGF
MFS Government Markets Income Trust
8/4/2021$0.0271$0.02710.07%7.6%8/17/20218/31/2021Short Interest ↑
News Coverage
Positive News
Reinsurance Group of America logo
RGA
Reinsurance Group of America
8/4/2021$0.73$0.704.29%2.5%8/16/20218/31/2021Earnings Report
Analyst Upgrade
News Coverage
Gap Up
Main Street Capital logo
MAIN
Main Street Capital
8/4/2021$0.21$0.20502.44%6.1%9/28/202110/15/2021Upcoming Earnings
News Coverage
Kforce logo
KFRC
Kforce
8/4/2021$0.26$0.2313.04%1.8%9/9/20219/24/2021Earnings Report
News Coverage
Gap Down
Capital Southwest logo
CSWC
Capital Southwest
8/4/2021$0.44$0.432.33%6.6%9/14/20219/30/2021Earnings Report
Analyst Report
News Coverage
Big 5 Sporting Goods logo
BGFV
Big 5 Sporting Goods
8/4/2021$0.25$0.1838.89%4.6%8/31/20219/15/2021Earnings Report
Analyst Report
News Coverage
High Trading Volume
Westlake Chemical Partners logo
WLKP
Westlake Chemical Partners
8/4/2021$0.4714$0.46461.46%7.0%8/11/20218/26/2021Earnings Report
News Coverage
Clearway Energy logo
CWEN
Clearway Energy
8/3/2021$0.3350$0.32901.82%4.49%8/31/20219/15/2021Earnings Report
News Coverage
Microchip Technology logo
MCHP
Microchip Technology
8/3/2021$0.4370$0.41305.81%1.19%9/3/2021Earnings Report
Analyst Report
Stock Split
Short Interest ↓
News Coverage
Pioneer Natural Resources logo
PXD
Pioneer Natural Resources
8/3/2021$1.51$0.56169.64%3.9%9/2/20219/17/2021Earnings Report
Analyst Revision
News Coverage
Gap Down
Quaker Chemical logo
KWR
Quaker Chemical
8/3/2021$0.4150$0.39505.06%0.64%10/14/202110/29/2021Earnings Report
Fidelity National Financial logo
FNF
Fidelity National Financial
8/3/2021$0.40$0.3611.11%3.66%9/15/20219/30/2021Earnings Report
Analyst Downgrade
Buyback Announcement
Short Interest ↑
News Coverage
Positive News
Willis Towers Watson Public logo
WLTW
Willis Towers Watson Public
8/3/2021$0.80$0.7112.68%1.57%10/15/2021Earnings Report
Analyst Upgrade
News Coverage
BankFinancial logo
BFIN
BankFinancial
8/3/2021$0.10$0.04150.00%3.5%8/10/20218/27/2021Earnings Report
Short Interest ↑
News Coverage
Viper Energy Partners logo
VNOM
Viper Energy Partners
8/2/2021$0.33$0.2532.00%7.35%8/11/20218/19/2021Earnings Report
News Coverage
Positive News
CVR Partners logo
UAN
CVR Partners
8/2/2021$1.72$0.70145.71%11.94%8/12/20218/23/2021News Coverage
Positive News
NXR
Nuveen Select Tax-Free Income Portfolio 3
8/2/2021$0.0470$0.04651.08%3.16%8/12/20219/1/2021News Coverage
MFS Multimarket Income Trust logo
MMT
MFS Multimarket Income Trust
8/2/2021$0.0420$0.04190.29%8.0%8/17/20218/31/2021News Coverage
Positive News
MIN
MFS Intermediate Income Trust
8/2/2021$0.0270$0.02671.01%8.71%8/17/20218/31/2021Short Interest ↓
News Coverage
Positive News
Diamondback Energy logo
FANG
Diamondback Energy
8/2/2021$0.45$0.4012.50%2.35%8/11/20218/19/2021Earnings Report
Analyst Revision
News Coverage
Gap Down
Simon Property Group logo
SPG
Simon Property Group
8/2/2021$1.50$1.407.14%4.64%9/8/20219/30/2021Earnings Report
Analyst Upgrade
News Coverage
Yamana Gold logo
AUY
Yamana Gold
8/2/2021$0.03$0.026314.29%2.7%9/29/202110/14/2021Earnings Report
Analyst Report
Analyst Revision
The Scotts Miracle-Gro logo
SMG
The Scotts Miracle-Gro
8/2/2021$0.66$0.626.45%1.5%8/26/20219/10/2021Earnings Report
News Coverage
Piper Sandler Companies logo
PIPR
Piper Sandler Companies
8/2/2021$0.55$0.4522.22%1.2%8/26/20219/10/2021Earnings Report
Analyst Report
Arbor Realty Trust logo
ABR
Arbor Realty Trust
8/2/2021$0.35$0.342.94%7.7%8/13/20218/31/2021Earnings Report
Analyst Report
News Coverage
Positive News
HIHO
Highway
8/2/2021$0.06$0.02200.00%7.06%9/3/202110/12/2021
Global Payments logo
GPN
Global Payments
8/2/2021$0.25$0.195028.21%0.52%9/9/20219/24/2021Earnings Report
Analyst Report
Buyback Announcement
News Coverage
High Trading Volume
Louisiana-Pacific logo
LPX
Louisiana-Pacific
7/31/2021$0.18$0.1612.50%1.28%8/9/20219/1/2021Earnings Report
Analyst Report
Analyst Revision
News Coverage
Peoples Financial Services logo
PFIS
Peoples Financial Services
7/30/2021$0.38$0.372.70%3.53%8/30/20219/15/2021Positive News
NRT
North European Oil Royalty Trust
7/30/2021$0.15$0.147.14%7.83%8/12/20218/25/2021News Coverage
Positive News
VanEck Vectors Moody's Analytics IG Corporate Bond ETF logo
MIG
VanEck Vectors Moody's Analytics IG Corporate Bond ETF
7/30/2021$0.0470$0.04504.44%2.23%8/2/20218/6/2021News Coverage
Positive News
High Trading Volume
Leidos logo
LDOS
Leidos
7/30/2021$0.36$0.345.88%1.34%9/14/20219/30/2021Earnings Report
Analyst Report
Options Volume
News Coverage
High Trading Volume
IBTI
iShares iBonds Dec 2028 Term Treasury ETF
7/30/2021$0.0210$0.015040.00%0.97%8/2/20218/6/2021Positive News
IBTH
iShares iBonds Dec 2027 Term Treasury ETF
7/30/2021$0.0190$0.0090111.11%0.88%8/2/20218/6/2021Positive News
HYXF
iShares ESG Advanced High Yield Corporate Bond ETF
7/30/2021$0.1740$0.16704.19%3.99%8/2/20218/6/2021Short Interest ↓
Positive News
iShares J.P. Morgan USD Emerging Markets Bond ETF logo
EMB
iShares J.P. Morgan USD Emerging Markets Bond ETF
7/30/2021$0.35$0.34800.57%3.73%8/2/20218/6/2021
VanEck Vectors Fallen Angel High Yield Bond ETF logo
ANGL
VanEck Vectors Fallen Angel High Yield Bond ETF
7/30/2021$0.1080$0.10304.85%3.94%8/2/20218/6/2021Positive News
Vanguard Total Corporate Bond ETF ETF Shares logo
VTC
Vanguard Total Corporate Bond ETF ETF Shares
7/30/2021$0.1770$0.17600.57%2.28%8/2/20218/5/2021Positive News
Vanguard Short-Term Treasury Index Fund ETF Shares logo
VGSH
Vanguard Short-Term Treasury Index Fund ETF Shares
7/30/2021$0.0180$0.01705.88%0.35%8/2/20218/5/2021
Vanguard Long-Term Treasury Index Fund ETF Shares logo
VGLT
Vanguard Long-Term Treasury Index Fund ETF Shares
7/30/2021$0.1430$0.13208.33%1.89%8/2/20218/5/2021Positive News
Vanguard Intermediate-Term Treasury Index Fund ETF Shares logo
VGIT
Vanguard Intermediate-Term Treasury Index Fund ETF Shares
7/30/2021$0.0670$0.06109.84%1.17%8/2/20218/5/2021Short Interest ↓
Positive News
Vanguard Short-Term Corporate Bond Index Fund ETF Shares logo
VCSH
Vanguard Short-Term Corporate Bond Index Fund ETF Shares
7/30/2021$0.1080$0.10304.85%1.56%8/2/20218/5/2021Positive News
Vanguard Long-Term Corporate Bond Index Fund ETF Shares logo
VCLT
Vanguard Long-Term Corporate Bond Index Fund ETF Shares
7/30/2021$0.2770$0.27401.09%3.05%8/2/20218/5/2021Positive News
Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares logo
VCIT
Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares
7/30/2021$0.1790$0.16905.92%2.24%8/2/20218/5/2021Positive News
Vanguard Total Bond Market Index Fund ETF Shares logo
BND
Vanguard Total Bond Market Index Fund ETF Shares
7/30/2021$0.1360$0.13203.03%1.88%8/2/20218/5/2021Positive News
National Instruments logo
NATI
National Instruments
7/30/2021$0.27$0.258.00%2.56%8/6/20218/30/2021Earnings Report
SJW Group logo
SJW
SJW Group
7/30/2021$0.34$0.187581.33%1.98%8/6/20219/1/2021
Companhia Siderúrgica Nacional logo
SID
Companhia Siderúrgica Nacional
7/30/2021$0.25$0.002012,400.00%2.63%8/6/20218/17/2021
Relx logo
RELX
Relx
7/30/2021$0.3351$0.1797.12%2.28%8/5/20219/13/2021Analyst Report
High Trading Volume
Continental Resources logo
CLR
Continental Resources
7/30/2021$0.15$0.1136.36%1.76%8/9/20218/20/2021Earnings Report
Analyst Revision
Positive News
Gap Down
Lloyds Banking Group logo
LYG
Lloyds Banking Group
7/30/2021$0.0375$0.031817.80%2.8%8/6/20219/23/2021Analyst Report
Short Interest ↑
Fortis logo
FTS
Fortis
7/30/2021$0.4059$0.39622.45%3.6%8/18/20219/1/2021Analyst Revision
South State logo
SSB
South State
7/30/2021$0.49$0.474.26%2.8%8/11/20218/19/2021
Oppenheimer logo
OPY
Oppenheimer
7/30/2021$0.15$0.1225.00%1.3%8/11/20218/26/2021
MGIC Investment logo
MTG
MGIC Investment
7/30/2021$0.08$0.0633.33%2.3%8/11/20218/26/2021
Littelfuse logo
LFUS
Littelfuse
7/30/2021$0.53$0.4810.42%0.7%8/18/20219/2/2021Earnings Report
Insider Selling
Short Interest ↓
Analyst Revision
Byline Bancorp logo
BY
Byline Bancorp
7/30/2021$0.09$0.0650.00%1.5%8/9/20218/24/2021Earnings Report
Analyst Downgrade
Short Interest ↑
Analyst Revision
News Coverage
AllianceBernstein logo
AB
AllianceBernstein
7/30/2021$0.91$0.8112.35%7.0%8/6/20218/19/2021Earnings Report
Analyst Upgrade
Norfolk Southern logo
NSC
Norfolk Southern
7/30/2021$1.09$0.9910.10%1.69%8/6/20218/20/2021Earnings Report
Insider Selling
Matthews International logo
MATW
Matthews International
7/30/2021$0.2150$0.1365.38%2.52%8/6/20218/23/2021Earnings Report
Janus Henderson Group logo
JHG
Janus Henderson Group
7/30/2021$0.38$0.365.56%3.84%8/6/20218/25/2021Earnings Report
Analyst Revision
Silvercrest Asset Management Group logo
SAMG
Silvercrest Asset Management Group
7/29/2021$0.17$0.166.25%4.26%9/9/20219/17/2021Earnings Report
Positive News
B. Riley Financial logo
RILY
B. Riley Financial
7/29/2021$2.00$0.35471.43%2.8%8/12/20218/26/2021News Coverage
Premier Financial logo
PFC
Premier Financial
7/29/2021$0.27$0.263.85%4.03%8/19/20218/27/2021Earnings Report
Analyst Report
Hawkins logo
HWKN
Hawkins
7/29/2021$0.13$0.12305.69%1.43%8/12/20218/27/2021Earnings Report
Short Interest ↑
FNCB Bancorp logo
FNCB
FNCB Bancorp
7/29/2021$0.0750$0.0625.00%4.08%8/31/20219/15/2021News Coverage
Community Healthcare Trust logo
CHCT
Community Healthcare Trust
7/29/2021$0.4330$0.430.70%3.48%8/12/20218/27/2021Earnings Report
News Coverage
Apartment Income REIT logo
AIRC
Apartment Income REIT
7/29/2021$0.44$0.432.33%3.34%8/12/20218/27/2021Earnings Report
Short Interest ↓
Rio Tinto Group logo
RIO
Rio Tinto Group
7/29/2021$1.85$1.198454.37%6.9%8/12/20219/23/2021Dividend Announcement
Analyst Report
Analyst Revision
Tempur Sealy International logo
TPX
Tempur Sealy International
7/29/2021$0.09$0.0728.57%0.83%8/11/20218/26/2021Earnings Report
Insider Selling
Analyst Revision
Great Western Bancorp logo
GWB
Great Western Bancorp
7/29/2021$0.05$0.01400.00%0.65%8/12/20218/27/2021Earnings Report
Gap Down
First Mid Bancshares logo
FMBH
First Mid Bancshares
7/29/2021$0.22$0.20507.32%2.17%8/17/20219/1/2021Earnings Report
Analyst Revision
Cullen/Frost Bankers logo
CFR
Cullen/Frost Bankers
7/29/2021$0.75$0.724.17%2.78%8/30/20219/15/2021Earnings Report
Analyst Revision
News Coverage
Skyworks Solutions logo
SWKS
Skyworks Solutions
7/29/2021$0.56$0.5012.00%1.14%8/16/20219/7/2021Earnings Report
Short Interest ↓
Republic Services logo
RSG
Republic Services
7/29/2021$0.46$0.42508.24%1.59%9/30/202110/15/2021Earnings Report
Analyst Report
Options Volume
Analyst Revision
Barclays logo
BCS
Barclays
7/29/2021$0.1110$0.0555100.20%0.5%8/12/20219/17/2021Analyst Upgrade
Ovintiv logo
OVV
Ovintiv
7/29/2021$0.14$0.093849.25%2.1%9/14/20219/30/2021Analyst Upgrade
Analyst Revision
Gap Down
First Community Bankshares logo
FCBC
First Community Bankshares
7/29/2021$0.27$0.258.00%3.7%8/6/20218/23/2021Analyst Upgrade
Analyst Revision
Comfort Systems USA logo
FIX
Comfort Systems USA
7/29/2021$0.12$0.11504.35%0.6%8/12/20218/24/2021Earnings Report
Short Interest ↑
American States Water logo
AWR
American States Water
7/29/2021$0.3650$0.33508.96%1.67%8/13/20219/1/2021Earnings Report
Analyst Report
News Coverage
The Hershey logo
HSY
The Hershey
7/29/2021$0.9010$0.804012.06%2.04%8/19/20219/15/2021Earnings Report
Insider Selling
Analyst Revision
Cactus logo
WHD
Cactus
7/28/2021$0.10$0.0911.11%1.07%8/27/20219/16/2021Earnings Report
Gap Down
OFG Bancorp logo
OFG
OFG Bancorp
7/28/2021$0.12$0.0850.00%2.06%9/29/202110/15/2021Short Interest ↑
CyrusOne logo
CONE
CyrusOne
7/28/2021$0.52$0.511.96%2.9%9/23/202110/8/2021Analyst Upgrade
Analyst Revision
BancorpSouth Bank logo
BXS
BancorpSouth Bank
7/28/2021$0.20$0.195.26%3.07%9/14/202110/1/2021Analyst Revision
Gap Down
Bankwell Financial Group logo
BWFG
Bankwell Financial Group
7/28/2021$0.18$0.1428.57%2.56%8/13/20218/26/2021Analyst Upgrade
Analyst Revision
News Coverage
American Water Works logo
AWK
American Water Works
7/28/2021$0.6030$0.60250.08%1.41%8/9/20219/1/2021Earnings Report
Analyst Downgrade
News Coverage
Altabancorp logo
ALTA
Altabancorp
7/28/2021$0.17$0.1513.33%1.66%8/6/20218/16/2021Analyst Revision
Wingstop logo
WING
Wingstop
7/28/2021$0.17$0.1421.43%0.41%8/12/20219/3/2021Earnings Report
Insider Selling
Analyst Revision
Hess Midstream logo
HESM
Hess Midstream
7/28/2021$0.5040$0.452611.36%7.92%8/6/20218/13/2021Earnings Report
News Coverage
Easterly Government Properties logo
DEA
Easterly Government Properties
7/28/2021$0.2650$0.261.92%4.7%8/11/20218/24/2021Earnings Report
Analyst Report
News Coverage
Community Trust Bancorp logo
CTBI
Community Trust Bancorp
7/28/2021$0.40$0.38503.90%3.99%9/14/202110/1/2021Positive News
Ares Capital logo
ARCC
Ares Capital
7/28/2021$0.41$0.402.50%8.05%9/14/20219/30/2021Analyst Report
Short Interest ↑
Analyst Revision
Portland General Electric logo
POR
Portland General Electric
7/28/2021$0.43$0.09377.78%3.5%9/24/202110/15/2021Earnings Report
Analyst Upgrade
Short Interest ↑
Analyst Revision
Ball logo
BLL
Ball
7/28/2021$0.20$0.1533.33%0.99%8/31/20219/15/2021Upcoming Earnings
Marathon Oil logo
MRO
Marathon Oil
7/28/2021$0.05$0.0425.00%1.7%8/17/20219/10/2021Gap Down
How to Invest in Stocks with Increasing Dividends

Dividend stocks have a place in every investor’s portfolio. However, savvy investors know that the secret to success in dividend investing is to identify companies that have a history of increasing their dividend yield over time. Companies that pay dividends are typically mature companies in what are considered defensive stocks (utilities, consumer staples, etc.). These stocks do not generate the same capital growth as high growth stocks so they offer a dividend to help reward shareholders. The best of the best of these stocks are the dividend princes, aristocrats, and kings that have a 10, 25, and 50-year history of increasing their dividend. Dividend investors that do not need the income right away can also take advantage of re-investing dividends as a strategy to help maximize their total return. And for investors who are more comfortable with fund investing, there are a variety of mutual funds and ETFs that are specific to dividend stocks.

Introduction

Income-oriented investors love dividend stocks. These investors love dividend stocks that consistently increase their dividend. As dividend yields go up, it typically causes share prices to increase. This is a win-win for investors as they generate regular dividend income while seeing the value of their shares increase. In this article, we'll take a look at how investors can look for stocks that are increasing their dividends and how to maximize their gain from those investments.

What is a dividend?

A dividend is a monetary payment made to shareholders that comes out of a company’s profit. A dividend is declared and usually pays out quarterly. However, some companies pay a monthly dividend. Still, others pay a single, annual dividend. Investors that are looking for income, as well as reasonable growth, are attracted to dividend stocks.

What companies pay dividends?

Dividends are usually paid by companies who have a slow, steady growth. These companies will not get the same "bang for their buck" by reinvesting in their business. This means to increase shareholder value they will either buy other companies (growth through acquisition) or they will pay dividends – sometimes both.

Why do companies increase dividends?

Companies increase their dividend yield for one of two reasons. The most common reason is that their net profits are increasing. As net profits increase, there is more money to return to shareholders. A second reason is that a company may have a change in strategy. In many cases, a company that is issuing a dividend is still making investments to spur growth and expansion. However, if the company is forecasting an economic slowdown, they may choose to put less money into capital projects. On the opposite end of the spectrum, a rapidly growing company may want to consolidate its capital gains and reassess its market position before continuing its growth strategy. A company may also simply decide to increase its dividend yield to attract more equity investors. In all cases, the choice to increase a dividend means that a company is leaving a larger portion of their profits available to be returned to investors as dividends.

Understanding dividend yield and dividend payout ratio

The dividend yield is the ratio of a company’s annual dividend compared to its share price represented as a percentage. To calculate dividend yield, let’s look at this example:

  • Company A announces a $2 per share annual dividend. The stock costs $40 per share.
  • Company B announces a $1 per share annual dividend. Their stock also costs $40 per share.

To calculate the yield, you would simply divide the announced per share annual dividend by the share price.

  • For company A, that would be 2/40 = 5%
  • For company B, that would be 1/40 = 2.5%

Simply put, investing $10,000 in Company A would produce $500 of annual dividend income. That same $10,000 in Company B would produce $250 in annual dividend income. Assuming all other fundamentals were the same, income-oriented investors would prefer to invest in Company A because of the higher yield.

The dividend payout ratio(also known as simply the payout ratio) gives investors an idea of how much profit a company is returning to shareholders as opposed to how much money they are keeping on hand for reinvestment, to pay off debt, or to hold as cash (i.e. retained earnings). The formula for the dividend payout ratio is as follows:

  • Dividend Payout Ratio = Dividends Paid/Net Income

Some companies will payout 100% of their income to shareholders. An investor should expect a company’s payout ratio to be higher if they are a mature, established company. When a company has a high percentage of retained earnings, it can try the patience of investors.

How to invest in stocks with increasing dividends

Step One: Choose wisely

Once you’ve looked at a company’s dividend yield and dividend payout ratio, it’s still important to choose wisely. Although a dividend is generally considered to be a sign that a company is healthy, that is not always the case. Keep in mind that a dividend is an alternative measure of capital growth. Growth investors would rather invest in companies that are generating impressive revenue and plowing that money back into their business to stimulate even more growth.

A company like Coca-Cola has continued to grow year after year (it’s a favorite of Warren Buffett). Coke’s appeal is in a dividend that is both consistently being issued and is growing every year.

But just because a company has a reputation for offering a dividend, investors should still expect a level of dividend growth. IBM issues a nice dividend of around 4.5% per year. However, the stock has been battered for several years and was showing negative capital growth. So even if investors were reinvesting their dividends, they would not be seeing a large total return from holding that stock.

Also, remember that just because a company announces a dividend does not mean they have to pay it. This is not common, but some companies will announce a dividend, usually with a very attractive yield, to entice investors. But if the company runs into financial difficulty, any dividends are usually the first thing to get cut.

Many companies have a solid track record of raising their dividends. The best of the best have royal titles: princes, aristocrats, and kings.

  • Dividend princes have raised their dividend for at least 10 years.
  • Dividend aristocrats have raised their dividend for at least 25 years.
  • Dividend kings have raised their dividend for at least 50 years.

These companies are very attractive to investors. Any company that has both the desire and the ability to generate increased dividend payments for its shareholders is a stock worth considering for an investor's portfolio. Dividend stocks are regarded as defensive stocks because of their ability to weather the volatility of both bull and bear markets. Put another way, most of these companies are in industries where consumers and businesses will always have a need for their products or services. The ability of these companies to increase their dividend for at least 10 years means that many of these companies have a strong, competitive advantage.

Step Two: Look to reinvest dividends

Many, but not all, dividend-paying companies allow individuals to reinvest dividends through a dividend reinvestment plan (DRIP). Automatic reinvestment is a strategy for investors who do not need regular income that is generated by dividends.

Here’s a simplified example of how a DRIP works. Company XYZ has a share price of $25 per share and a dividend yield of 5%. If an investor buys 100 shares, they will earn a yearly dividend of $125 ($2,500 x 5%). If they choose to reinvest that dividend, at the end of the year they will have purchased an additional five shares of Company XYZ stock and the value of their holdings assuming the share price remained at $25 would be $2,625. It’s a wash, right? But what if the share price climbs to $30 by the end of the year? Assuming the dividend yield does not increase, the payout would be $125, but the 105 shares would now be worth $3,150.

Some companies allow investors to put in additional money (with some minimum and maximum restrictions). An investor will typically pay the market price for those shares, although some companies will sell these shares at a slight discount.

There are two caveats for investors looking to buy additional shares separate from dividends being reinvested. First, is that it can take some time to sell the shares that you buy directly from the company. Second, it is important to remember that every dividend reinvestment represents shares that are being purchased at a different price. This means that the capital gains are going to be different for every transaction. Therefore, when you go to sell these shares all of those capital gains have to be accounted for.

Step Three: Look at dividend mutual funds and ETFs

Investing in a dividend mutual fund or ETF is a good option for beginning investors and investors who don’t want to take the time to choose their own stocks or track individual stocks once they buy them. These funds are typically comprised of multiple dividend-paying stocks. If you believe in the idea of not putting all your eggs in one basket, this may be a great option.

However, choosing a fund can be like walking into a Baskin-Robbins. There are a lot of varieties and it’s still up to you to decide on which funds are right for you. You'll want to look at the stocks that are included and check their dividend yield, their consistency with paying the dividend over time, their expense ratio (low is good) and the size of the company, or market capitalization. From lowest to highest risk, there are large caps, mid-caps, and small caps.

Why do companies cut their dividends?

If dividends are attractive to some investors why do companies cut their dividend? As we mentioned above, a company that is not rapidly growing may take on debt to spur growth. If the company takes on a lot of debt in a short time, the dividend may have to get cut for the company to service the payment of the debt.

Beware of chasing a yield

One trap that can befall dividend investors is chasing high yield. In some cases, a company's dividend yield exists for good reason. But in some cases, the high dividend yield is a warning that the company is not financially stable. That’s why it’s always good to follow the strategy of looking at a company’s fundamentals to understand if their dividend yield and/or payout ratio is sustainable and also looking for companies with a history of increasing yields.

The final work on investing in stocks with increasing dividends

Investing in dividend stocks is a time-honored way of growing wealth slowly. Following the simple three-part strategy of choosing a company wisely, looking to reinvest your dividends, and if necessary investing in dividend mutual funds and ETFs are good ways to identify and take advantage of dividend stocks that are increasing their dividends regularly. Dividend investing is not about chasing the highest yield you can find. There are often reasons why a company is offering a high yield. Like many things in life, if it looks too good to be true, it usually is.


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