The dividend growth rate (DGR) is an important aspect when analyzing dividend stocks, not only to identify the best dividend growers but also to help dividend investor to keep up with inflation.
Dividend growth means that the company should generate robust free cash flow. Free cash flow is defined as a company’s operating cash flow minus capital expenditures. The strong free cash flow allows a companies’ management to pay a higher dividend growth rate. Since 1990, the average or mean annual dividend growth rate for the S&P 500 index has been 6.04%. The current S&P 500 dividend growth is 6.43%.
For dividend aristocrats, we use the following indication for their dividend growth rate (3 years period):
DGR between 5% and 9%: average growth rate
DGR between 10% and 12.5%: fast growth rate
DGR above 12.5%: very fast growth rate
The table below lists the top ten dividend aristocrats and their current dividend yield, DGR for 3,5, and 10 years.
Members can use the DGR screener(s).