Choosing Dividend Growth Stocks

One of the ways that you can prepare for the future, and build your wealth, is to invest in dividend stocks. Not only do dividend stocks provide you with the chance to enjoy capital appreciation, but you can also receive regular dividend income.

Dividend growth stocks can add even more to your portfolio. These are stocks that have the ability to grow in the future, and continue to grow their dividends. You can start with some of the dividend aristocrats, and see which are likely to continue to provide growth in dividends and in value.  Dividend growth stocks can offer you the chance to build wealth and income.

How to Pick Dividend Growth Stocks

As you decide which stocks to include in your portfolio, you should look at your options, as well as your goals. While you want your dividend stocks to reflect your future needs and desires, you also want to make sure that you are getting a good deal.

One thing you can do to calculate stock valuation is to use the dividend growth model. Before investing in a stock, it can help to have an idea of whether it is a good deal. Is it inexpensive for its expectations? Is it likely to grow enough in the future to justify its current valuation? Looking for an undervalued dividend stock can be a good move.

You can also look at some of the fundamentals of the company. Is the business model stable? Does the company manage the company in way that is likely to ensure that growth can be sustainable? Some of the best choices for a dividend growth portfolio are a bit boring: Mature companies with a history of paying dividends – and raising them. Sound balance sheets can also be good indicators that a dividend stock is a good choice.

Selling Your Dividend Growth Stock

When you buy a dividend growth stock, remember that you do so in an effort to hold on to something that will provide you with value now and in the future. That means that dumping it at the first sign of market trouble isn’t the best choice. The decision to sell a stock should not be taken lightly.

Before selling, consider your goals. Long-term, is the stock still likely to do well? If so, it might be worth it to hold on to the stock for a little bit longer, wait for it to recover. Plenty of great companies see their stock prices fall during a crash; that just means it’s a good time to get good deals. Instead of selling as a knee-jerk reaction to the markets, consider selling only if something changes fundamentally about the stock.