Hello! Dividend investing is a fascinating topic. Today I’m sharing expert insights from Ben Reynolds of Sure Dividend, a dividend growth investor who has been featured in Forbes, Motley Fool, MSN Money, TheStreet, and more. He provides a wealth of practical information on this approach.
There are countless ways to invest: mutual funds, ETFs, growth stocks, value stocks, dividend stocks, preferred shares, options, bonds, currencies, commodities, and more. That variety can feel overwhelming. No matter your income—whether you save $100 a month or earn $300,000+ a year—saving and investing consistently matters.
I believe dividend growth investing is an excellent long-term strategy for compounding wealth. This article examines that approach in detail and also explains why I launched Sure Dividend.
Sure Dividend launched in March 2014 out of frustration with high fees and a lack of transparency in the investment industry. The common model—working with a financial advisor who places your money into mutual funds charging 1% or more of assets under management—adds up. One percent might not sound like much, but when the S&P 500 has historically delivered inflation-adjusted compound returns near 6.8% annually, paying 1% effectively hands over a large portion of returns to fees. Low-cost funds have tended to outperform higher-cost funds across asset classes; the more you pay in fees, the more your long-term results suffer.
I founded Sure Dividend to promote dividend growth investing as a transparent, low-cost way to build wealth. Buying and holding strong businesses that pay growing dividends lets investors earn increasing income over time without ongoing management fees. When you own individual stocks, there’s no recurring fee to hold them, and the process can be simplified—making ownership of shareholder-friendly companies trading at fair or attractive prices accessible to more people.
My Journey to Becoming a Dividend Growth Investor
My path wasn’t instant. I caught the investing bug in college, drawn by the intellectual challenge rather than large amounts of capital. I read extensively about investing, especially value investing—the idea of buying businesses that appear to trade below their intrinsic worth and holding until they reach fair value.
Benjamin Graham is the father of value investing, and his most famous student is Warren Buffett. Buffett distilled the approach into memorable ideas like “Price is what you pay. Value is what you get.” Graham focused on deeply undervalued businesses, sometimes those trading below liquidation value. Buffett refined that by applying value principles to quality companies: “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”
A “great business” typically has a strong, durable competitive advantage—something that differentiates it from competitors for the long term. Coca-Cola’s brand equity is a classic example: many companies can make a cola, but Coca-Cola’s brand gives it a competitive moat.
From Value and Quantitative Strategies to Dividend Growth
Although I valued the concept of buying undervalued companies, markets are efficient and value investing requires patience. I also explored quantitative rule-based strategies, portfolio diversification, and various ETF approaches. What ultimately shifted my focus to dividend growth investing was a deep interest in minimizing investment costs and reducing frictional losses.
Every trade carries hidden costs—slippage, brokerage fees, bid-ask spreads, tax consequences, and the opportunity cost of time spent managing trades. Research shows individual investors often underperform due to excessive trading. The lesson: avoid needless buying and selling.
Warren Buffett captures this mindset: “When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.” Holding reduces capital gains taxes in taxable accounts and leaves more capital compounding inside the investments. Dividend growth investing naturally encourages buy-and-hold behavior because dividends typically rise over time. As dividend income increases, investors are less inclined to sell during downturns, avoiding self-inflicted performance erosion.
The Evidence for Dividend Growth Investing
Buffett himself is primarily invested in dividend-paying stocks—more than 90% of his portfolio sits in companies that pay dividends, many with long dividend histories—offering anecdotal support for the approach. More systematic evidence is compelling: a study covering 1972 through 2014 found compound annual returns of 2.3% for non-dividend stocks, 9.2% for dividend-paying stocks, and 10.1% for dividend growth stocks.
Dividend-paying firms generally must generate real earnings and maintain financial stability to distribute cash to shareholders. Companies that consistently raise dividends demonstrate an ability to grow cash flows and reward owners over long periods. A well-known subset is the Dividend Aristocrats—companies that have increased dividends for 25+ consecutive years. The Dividend Aristocrats Index includes familiar, high-quality names such as Clorox, PepsiCo, Walmart, Procter & Gamble, and Johnson & Johnson.
Over the past decade, the Dividend Aristocrats Index delivered strong results—averaging about 9.8% annually versus roughly 6.4% for the S&P 500—while also showing slightly lower volatility. It’s rare to find strategies that outperform the market over long periods while offering lower price volatility; dividend growth investing has provided precisely that historical combination.
Final Thoughts — Financial Freedom Through Passive Dividend Income
Dividend growth investing is not a get-rich-quick scheme. It takes time, discipline, and patience. Over years and decades, consistently holding high-quality companies that increase dividends can compound wealth and income. Financial independence is attainable when dividend income covers living expenses and those dividends are likely to grow over time.
Sure Dividend is more than a business to me. I have all of my personal investments in dividend growth stocks, and at the time of purchase, each holding ranked in the Top 20 or better according to The 8 Rules of Dividend Investing. I believe dividend growth investing is one of the most effective ways for individual investors to compound wealth over time—for myself and for others.
Are you interested in dividend investing and becoming a dividend growth investor? Why or why not?