The Case for Buying Smaller Dividends That Grow Faster
An analysis suggests that stocks with small but fast-growing dividends may outperform those with high static yields. For instance, JNJ's dividend has more than quintupled since 1999.
MSFTMicrosoft Corporation
VVisa Inc.
JNJJohnson & Johnson
MCDMcDonald's Corporation
PGProcter & Gamble Company (The)
LOWLowe's Companies, Inc.Key Numbers
The Case for Buying Smaller Dividends That Grow Faster
A recent analysis highlights an alternative investment strategy: focusing on stocks with currently small dividend yields but high growth rates, rather than stocks with large static yields.
Details
The core principle is that long-term dividend growth can compensate for a low initial yield. For example, Johnson & Johnson (JNJ) paid $0.25 per share quarterly in 1999. By 2026, that amount had risen to $1.34 per share, more than quintupling.
Context
Other companies following this pattern include Microsoft (MSFT), Visa (V), McDonald's (MCD), Procter & Gamble (PG), and Lowe's (LOW). These companies have a history of consistently increasing their dividends, providing a growing income stream for long-term investors.
What This Means for Investors
For investors, focusing on dividend growth rather than current yield may be more effective for long-term wealth building. However, each company should be evaluated individually based on its financial health and growth prospects.
Frequently Asked Questions
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