There's power in dividend growth

Posted: January 29, 2013

BIG BLUE-CHIP companies, such as General Electric and Corning, are exciting not just because of their businesses, but also because of their dividends.

If you buy into a healthy company when its dividend yield (annual dividend divided by share price) is 3 percent, you are likely to get that payout every year, regardless of what happens to the stock price. (And today, such a yield easily tops many alternatives, such as bank accounts or CDs.)

Imagine that you bought 10 shares of Wanton Punctuation (ticker: ?#$@!) for $100 each, and it pays a respectable 3 percent dividend. With a $1,000 investment, that's an annual payout of $30. Not bad.

But dividends aren't static and permanent. Healthy companies raise them regularly. By holding on to great dividend-paying companies, you can enjoy rising dividend yields over time.

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