Getting Started with Dividend Growth Investing

Get a plan
Begin with the end in mind, what do you want to accomplish? Do you want to retire early and live off the dividends? Supplement your retirement income? Have a spouse stay home?

How much income do you need? Your goals will determine how you approach growing your dividend income. Do you need the money now or will it be 10-20 years until you need it? If you know how much income you want to produce, you can calculate how much money and time it will take to get there.

Dividends pay out cash to you as a shareholder. To grow your income faster, reinvest your dividends back into more stock so that your dividend income snowball grows faster

ETF vs Individual companies
This is a personal choice but for beginners I would recommend a dividend focused ETF. These ETFs are investment vehicles that hold groups of companies that pay dividends. It allows instant diversification to help protect you from the chance a single company goes down in value and is easy to start with. Some quality ETFs to look into include HDV, SCHD, VYM, VIG, SPHD, and DGRO, among others. You can buy an ETF through your investment broker the same way you do an individual company. Most brokers do not charge to buy an ETF, but there will be annual fees, usually .30% or less of your balance.

Individual companies
Allow you to have direct ownership of a company.
Maybe you like Johnson & Johnson, Starbucks, or McDonalds and think they have a good chance of growing faster/safer than the overall market. If so, you can choose a group of individual stocks to invest in. Make sure you invest in more than one to diversify your risks. Most experts state 20-25 stocks in different industries will make you diversified enough, but it is up to you to decide.

Wishlist
If you want to choose the stocks you want to invest, I would recommend creating a wishlist of companies, research them, understand what they do and what their future prospects are. Once you are comfortable with what you see, then you can decide to buy.

Allocation
You will want to eventually have a diverse group of stocks from different industries. Some industries include healthcare, industrial, consumer goods, technology, etc.

Valuation
If picking individual companies, you will do better if you buy them at a fair or discounted price. One common way to value a company is by their Price to Earnings ratio, also called P/E ratio. You can research the current P/E and compare it to their historical P/E and the P/E of their competitors to determine if it is a good value.