Top Criteria For Choosing A Dividend Stock - Double Digit Dividend Yields


I learned many lessons after reading 'Get rich with dividends - A proven system for earning double-digit returns' by Marc Lichtenfeld. I highly recommend that any dividend investor read this book to appreciate and understand dividend investing. The most important thing I learned was that the top criterion for choosing a dividend stock is the dividend per unit (DPU) growth rate of the dividend stock. 

Increasing Dividend Yields 

A dividend company with a yearly DPU positive growth rate will ensure that your dividend yield will only increase the longer you hold onto the stock. With sufficient time, this snowball compounding effect can potentially increase your dividend yield to double-digit yearly returns. A classic example would be owning shares of DBS stock. An investor who bought DBS stock 10 years ago is yielding at least close to a 20% yearly dividend yield due to DBS's yearly DPU growth rate. The further back you go, the higher the dividend yield becomes. An investor who bought DBS stock 20-30 years ago can yield at least a 30-50% dividend yield on their initial investment. That is an insane, jaw-dropping dividend yield for any dividend investor. You can read my recent article on why DBS is the best dividend stock to own in Singapore in 2025.  

Capital Gains

Moreover, assuming the market is rational in the long term, the DPU growth rate will usually translate to a higher share price of the dividend stock as the market adjusts to reflect the dividend yield. For example, if the dividend yield for a stock increases due to the DPU growth rate, more investors will purchase the stock, driving up the share price. This means that dividend investors who purchase dividend stock with a positive DPU growth rate will also be able to appreciate capital gains from the dividend stock. 

Healthy Balance Sheet

Lastly, a yearly positive DPU growth rate reflects that the company has a healthy balance sheet with positive cash flow and excellent management, as they can continually grow the company's profits while keeping operating costs relatively low. This provides investors with confidence that the company is well-managed with a healthy 

Conclusion

In conclusion, the DPU growth rate of a dividend stock should be the top criterion for selecting a dividend stock for dividend investors. You will eventually be able to obtain double-digit dividend yields with time if you select a good quality blue-chip dividend stock with a yearly positive DPU growth rate. The ultimate key to dividend investing is patience.

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