Dividend investing rewards you with regular cash payments for holding stocks or funds. The DRIP (Dividend Reinvestment Plan) strategy automatically buys more shares with every dividend — turning each payment into future dividends, creating a powerful compounding cycle.
Annual dividend income expressed as a % of the share price. A $100 stock paying $4/year has a 4% yield.
Reinvesting dividends buys more shares → more dividends → more shares. Over decades this creates exponential, not linear, growth.
Quality companies raise their dividend every year. A 7% DGR means a stock paying $3 today will pay ~$5.90 in 10 years.
Your dividend income as a % of your original cost basis. This grows every year with dividend raises — the key metric for long-term dividend investors.
| Year | Shares | Share Price | Dividend/Share | Annual Dividend | Yield on Cost | Portfolio Value |
|---|
Consider two investors who each buy 100 shares of a $50 stock (4% yield, 6% DGR, 7% price growth):
After 20 years, Investor A has significantly more shares and a much higher annual income — all from the same starting position. The difference is pure compounding.