In our view, after capital appreciation, the next best thing for an investor to enjoy is a growing stream of income as a result of steady dividend increases. The two typically go hand in hand. Investors in companies with increasing profitability ultimately will be rewarded with a higher share price. Likewise, if dividend payments are part of the company’s capital allocation strategy to reward shareholders, an annual dividend increase is highly likely. Doing so 25 years in a row earns them inclusion in the “Dividend Aristocrat” club. Building a portfolio that includes a number of companies with such characteristics can be a great way to augment income from other sources. If current dividend income is not needed, then regular dividend re-investment in additional shares of the company (commonly called “DRIPPING”) not only builds your share count, but also improves your cash flow since each subsequent dividend payment increases due to your higher share balance. The compounding effect is enhanced further whenever the dividend is increased. Most companies that have a history of increasing their payouts do so around the same time each year. For example, Caterpillar, Inc. and Oil-Dri Corporation of America recently announced 7.1% and 16.1% dividend increased, respectively.
Below are a few examples of the quarterly dividend payment changes over the past 10 years of companies both large and small that we follow, acknowledging that there is no guarantee that the rate of any future dividend increases, or any dividend payments at all, will continue. Indeed, companies both large and small have periodically had to cut or eliminate their payouts due to economic and business challenges.
| 8/2015 to 8/2025 | % Increase of Dividend | |
| Caterpillar Inc, | 0.77 to 1.51 | 96% |
| Ecolab Inc. | 0.33 to 0.65 | 97% |
| Johnson & Johnson | 0.75 to 1.30 | 73% |
| Microsoft Corp. | 0.31 to 0.83 | 167% |
| Oil-Dri Corp. of America | 0.105 to 0.18 | 71% |
| PepsiCo Inc. | 0.7025 to 1.4225 | 102% |
| RPM International | 0.26 to 0.51 | 96% |
| U.S. Lime & Minerals, Inc. | 0.025 to 0.06 | 140% |
By comparison, if looking strictly from a yield and cash flow perspective, the purchase in early August 2015 of a then recently issued 10-year U.S. Treasury would have locked in a yield of approximately 2.28%, securing a steady, never changing income stream until its maturity in early August 2025, but providing no capital appreciation. Source: Only in the past few years has the yield of a 10-year U.S. Treasury issue risen much, currently (August 2025) around 4.22%. Source: Board of Governors of the Federal Reserve Systems (US).
We monitor company dividend announcements weekly. An initial dividend declaration, significant dividend increase, and/or a “special, one-time” payout grabs our attention for further investigation. Such action, especially if the company has historically not paid a dividend or had previously given very modest increases, may be a sign that the company’s business prospects have improved or is entering a new phase of growth. If that’s the case, an investor may ultimately be doubly rewarded by both share price appreciation and more meaningful dividend increases in the future. A dividend cut or very modest, token increase, likely indicates the company is facing increased competitive challenges and needs to reallocate their capital to adjust to weaker pricing power, declining sales, or perhaps to pay down debt. Any of those challenges may signal it’s time to move on and look for better opportunities.