When you’re retired or approaching retirement, investing can feel overwhelming—especially when markets are unpredictable, interest rates bounce around, and headlines scream about the latest tech stock surge or crash. But there’s one strategy that has stood the test of time, quietly compounding wealth and providing steady income for decades: dividend growth investing.
And it’s not just a “feel-good” approach—it’s backed by long-term data that shows it can help you sleep better at nightand retire with confidence.
What the Numbers Tell Us
Let’s start with some real-world results.
Over a 37-year period (1986 to 2023), Canada’s main stock index returned about 6.2% per year. Companies that simply paid dividends did better—about 9.1%. But those that consistently grew their dividends? They returned a powerful 10.8% annually.
The story is just as compelling in the United States.
From 1973 to 2023, research by Hartford Funds shows that dividend growers turned a $100 investment into $14,118—an average annual return of 10.4%. Meanwhile, the broader equal-weighted S&P 500 turned that same $100 into $4,439—a decent return, but far behind dividend growers.
Now here’s the kicker: this remarkable outperformance came with less volatility. That means better sleep at night and a smoother ride for your retirement savings.
Why Dividend Growth Works
So what makes dividend growth such a reliable wealth builder—especially for retirees?
It comes down to one word: quality.
Companies that consistently raise their dividends aren’t just handing out money. They’re sending a signal to investors that they have:
- Strong balance sheets
- Steady, predictable earnings
- Real free cash flow (not accounting smoke and mirrors)
- Business models with staying power
These companies have found a formula that works—and they reward shareholders regularly. That’s exactly the kind of business you want in your retirement portfolio.
And while dividends may seem boring in today’s world of meme stocks and moonshots, they offer something no hot stock can match: steady income that often grows over time.
That income can be reinvested to compound your wealth… or used to pay bills in retirement. Either way, it’s powerful.
But Aren’t Dividends Tax-Inefficient?
Some investors argue that dividends aren’t tax-friendly and that companies should use buybacks instead. It’s true that dividends can come with a tax cost—but here’s the thing:
It’s not the dividend that matters most—it’s what it tells you about the company.
Firms that raise their dividends year after year are disciplined, resilient, and built for the long haul. That’s why dividend growers tend to outperform over time—and do so with fewer stomach-churning drops.
Why Dividend Growth Matters Now More Than Ever
Over the past decade, dividends played a smaller role in market returns—mostly because we lived in an environment of cheap money, low inflation, and high-flying tech stocks. Growth was easy to come by.
But the winds are shifting.
Looking ahead, we’re facing:
- Higher and stickier inflation
- Interest rates that may stay elevated
- Geopolitical uncertainty
- Slower globalization
- Labor shortages and energy constraints
In short, the next 10–20 years may look nothing like the easy-money era of the past. That’s why dividend growth stocks are regaining the spotlight.
They’re the kind of investments that offer predictable income, capital appreciation, and lower risk—a perfect combination for retirees.
A Real-World Way to Tap Into Dividend Growth
If you want a simple way to invest in this powerful strategy, consider an ETF like VIG (Vanguard Dividend Appreciation ETF). It focuses on U.S. companies with a track record of growing their dividends year after year.
Or build your own custom portfolio of companies with:
- Moats and market leadership
- Consistent free cash flow
- Modest payout ratios (so the dividend is sustainable)
- A long-term track record of dividend increases
It’s not flashy—but it works.
Bottom Line: Dividend Growth Is a Retiree’s Best Friend
Retired investors face a unique challenge: creating reliable income without running out of money. Dividend growth stocks offer a time-tested solution. They combine growth, income, and stability—a trifecta that’s hard to beat.
Whether you’re investing for the next 10 years or the next 30, dividend growth should be part of your plan.
Ready to Dive Deeper?
If you want to learn exactly how to build your own dividend income stream—step by step—I invite you to check out my book:
Build Your Own Retirement Dividend Machine: The Safer Path to Retirement Income, available now at Amazon.com in paperback and eBook formats.
This guide makes dividend investing simple, safe, and practical—especially for retirees who want peace of mind and a dependable retirement paycheck.
Disclaimer: This post is for educational purposes only and does not constitute financial advice. Always do your own due diligence or consult a qualified advisor before making investment decisions.