The Problems With Pursuing Dividend Growth Over High Yields

Date: 2025-07-15 19:00:21

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When you hear people talk about dividend investing online, or on CNBC, or on some other platform, you’ll notice they’re usually referring specifically to dividend growth investing. This is the strategy of buying very low-yielding stocks, typically offering yields of less than 1% to 2 or 3%, and hoping over a long period of time that these stocks will grow in share price and distributions. This was the original way people pursued dividend investing many decades ago, and most resources available on dividend investing still only cater to this strategy. For this way of investing, it’s all about the long term game, staying committed and invested for many years to see your income grow.

However in recent years, a new form of dividend investing has been gaining a lot in popularity. Fund managers have realized that investors, who aren’t necessarily retired, want higher-yielding investments available to them. More and more people started wanting higher dividends now, without having to wait decades for companies to try and grow theirs over time. This led to the creation of income investing, also known as high yield investing. People who are more motivated to invest in high-income-paying stocks and funds often receive criticism from dividend growth investors. Although income investing does have downsides, there are also downsides to dividend growth investing that I never see anybody talk about.

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