Dividend growth is one of the most powerful but often-overlooked elements of a great portfolio. Sure, having stocks that go up is important, and having income from investments with decent dividend yields is also key … but if you can buy a stock that steadily grows its dividend over time, your returns snowball in a hurry.
Furthermore, back in 2000, McDonald’s stock yielded about 0.7% per share, but if you bought back then, your personal dividend yield on a cost basis of around $30 would be almost 11% annually.
Of course, the big run-up in McDonald’s dividends has already happened, so dramatic dividend growth might be hard to come by in MCD going forward. In fact, some shareholders were upset in September when the recent dividend hike was just 5% above previous payouts.
But there are stocks out there that could be on the cusp of big dividend growth over the next decade based on huge increases to payouts recently — it’s just that you don’t hear about them because they aren’t household names.