It is always good to be a champion, and in the world of investing, dividend champions are stocks that have increased their dividends for at least 25 consecutive years.
Why is it important to seek out companies that have solid track records of dividend increases? Because by doing so, and coupling the approach with a dividend reinvestment plan, or DRIP, you can build a portfolio that is constantly growing its income power. When you combine dividend reinvestment with increased dividends, you are left with positions that increase in size each quarter, and once a year your dividend gets a nice boost, as will the number of shares your DRIP plan will purchase.
But a higher dividend payment is not the only reason to seek out dividend champions. A second, and just as important aspect to these stocks is that a long track record of dividend increases indicates strength in a company's underlying business. An ability to maintain a steady dividend program, let alone one that is consistently raising its dividend payment, illustrates that management is confident not only in the company's current standing, but also its ability to maintain the program moving forward.
Let's take a closer look at my favorite dividend champions, and why they are strong buy candidates for any portfolio.