Dividend Growth Rate

Dividend growth rate is the annualized pace at which a company raises its per-share dividend, usually quoted as a 3-year, 5-year, or 10-year compound annual growth rate. For income investors it is the second half of the return equation: starting yield tells you what the position pays now, growth rate tells you what it will pay later.

The yield-versus-growth tradeoff is the core screen. A stock yielding 1.5% and growing the dividend 12% a year doubles its payout roughly every six years; a 5% yielder growing at 2% barely outruns inflation. Which profile wins depends on holding period — fast growers need time for the compounding to overtake the high starter.

Sustainability checks come before the growth number. A dividend can only outgrow earnings for so long before the payout ratio pins it, so pair the historical CAGR with the payout ratio and free cash flow coverage. A 10-year raise streak funded by a payout ratio marching from 35% to 75% is a growth rate on borrowed time.