Dividend Growth Investment Tips and Ideas for 2021

Investing in a dividend growth stock can be a great long-term strategy for both protecting and increasing your fortune. This plan won’t make you rich overnight and it’s unlikely that you’ll get good income from these yields as a beginner trader. For dividends to amount to much you need to have big investments.

However, if you want to invest in your future, dividend growth stock definitely must be a part of your portfolio. This is even more important now, during a global economic crisis when the markets are volatile.

Dividend Growth Investment Tips for Success

Dividend growth stocks are a long-term investment that brings you steady, albeit small, income over time. Therefore, you need to understand that your strategy should be different compared to other types of stock.

The most important rule of this investment is to look beyond the yield. The highest-paying dividend stock is often not the best. To make the best choice you need to look at the dividend stock growth over the last couple of years. See what companies offer consistent and steady growth regardless of the circumstances. Remember that the apparent dividend yield might get higher if the business is struggling. In this case, you might incur a huge loss with this investment.

The other “golden rule” of growth dividend stock investing is to have a DRIP. DRIP stands for Dividend Reinvestment Plan, which is a strategy necessary for income generation off this stock. Essentially, dividends won’t bring you cash you can use now. But with a good reinvestment plan your portfolio’s long-term yield will do very well.

Another thing to consider when choosing dividend growth stock is annual dividend hikes. If the company increases dividends regularly, it indicates the stability and profitability of this investment. Look at long periods (20 years and more) to find the best businesses to invest in.

Dividend growth investing is traditionally considered a “safe haven” for investors. That’s why it’s getting more attention during the current crisis. However, you shouldn’t forget that even the best businesses might go under. Therefore, you should consider the macroeconomic situation and forecasts for different industries. It’s all right if this type of investment doesn’t show a good yield right now, as long as you are sure it will recover in the long term.

Best Dividend Growth Stocks to Invest in 2021

Stability is key for choosing dividend growth stock to invest in 2021. Therefore, you need to look at long-established businesses offering essential goods and services. Look for opportunities now while the stock might be more available than usual.

Some of the best options to buy are:

  • Berkshire Hathaway (NYSE:BRK-A), (NYSE:BRK-B).
    This conglomerate strives on diversity, so you might get one of the safest possible investments. Warren Buffet is the CEO who chose most of the components to Berkshire.
  • The Walt Disney Company (NYSE:DIS).
    Some parts of the entertainment industry have been hit hard by the coronavirus crisis. But Disney expanded to streaming, which has grown like never before. The company also now owns some of the most successful franchises in history. Therefore, if you can afford this stock, you can be sure it will do well in the future.
  • Enbridge (NYSE:ENB).
    Enbridge is an energy company and those are one of the safest investments by default. They might not show the best dividend performance in a crisis. But they always get their own back in the long term.
  • Philip Morris (NYSE:PM).
    While the damage smoking does to health is well-known, billions of people still do it. Therefore, Philip Morris, one of the leaders in the tobacco industry, is doing well regardless of any recession. In fact, as people are more prone to indulging in vices when stressed, this sad time is exactly when these companies do more business.

Bottom Line: Dividends for Long-Term Security

Dividends are a lot like investing in your career. You don’t see the benefits right away, but in a few years the choices of today will make a great difference. Don’t chase high yields when making this investment. Instead you need to focus on consistent growth and resistance to volatility during a crisis. The best dividend stocks won’t come cheap. Therefore, now you might have a better opportunity to buy those as the market has not yet fully recovered after the crash of 2020.

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