Five reasons to be a dividend growth investor, and the one thing it can't promise
Four fifths of what A$10,000 in Australian shares grew into from 1979 depended on the dividends. Companies that cut theirs lost money for fifty years. A dividend that never grows quietly stops paying your bills. Five reasons, with the numbers drawn, and the one thing growth can't promise.
Every dividend website publishes the list eventually. Five reasons to own companies that raise their dividends, assembled from American data, garnished with Warren Buffett, and scheduled to go out on a Tuesday. The lists are usually right, which is the irritating part. They are almost never written for anyone whose money actually sits on the ASX.
So here is the Australian version. The history comes from the Reserve Bank, the arithmetic runs through Dividend Guardian's own bill ladder, and there's a sixth point at the end that the lists leave out, because it's the one that costs money.
1. Dividends did most of the work here
Put A$10,000 into Australian shares at the end of 1979, then do the hardest thing in investing, which is nothing, until March 2019. On price alone it became about A$123,620. With the dividends reinvested it became about A$651,010. Roughly four fifths of that money only exists because somebody kept putting the dividends back in: almost forty years of small, unglamorous cheques doing the work while the price took the headlines.
Show the numbers
| Value | Per year | |
|---|---|---|
| Price alone | A$123,620 | About 6.6% a year |
| With dividends reinvested | A$651,010 | About 11.2% a year |
That's before franking, which the index politely ignores. For anyone who can use the credits, the real gap is wider again.
The Americans got the same answer from their own history: Hartford Funds puts reinvested dividends at 85% of the S&P 500's cumulative total return since 1960. Australian companies just pay out more of what they earn, which makes the effect harder to miss, and it's why a yield means something different here.
2. Companies that raised their dividend did best, and the ones that cut did worst
Hartford Funds and Ned Davis Research sorted US stocks by what each company did with its dividend, then followed the money from 1973 to the end of 2025. Fifty-three years, which is long enough to include most of the ways a market can humiliate people.
Show the numbers
| Value | Volatility | |
|---|---|---|
| Grew or started a dividend | 10.22% | Volatility 15.97% |
| All dividend payers | 9.20% | Volatility 16.71% |
| Equal-weighted S&P 500 (the benchmark) | 7.74% | Volatility 17.55% |
| Paid, but never raised it | 6.87% | Volatility 18.45% |
| Paid no dividend | 4.21% | Volatility 21.91% |
| Cut or scrapped the dividend | −0.96% | Volatility 24.80% |
The companies that grew or started a dividend returned 10.22% a year, comfortably clear of the market's 7.74%. The ones that paid nothing managed 4.21%. The ones that cut or scrapped their dividend lost money, about 0.96% a year for half a century, which takes a certain kind of commitment.
I'd handle this chart with some care, and I'd still show it to anyone who asked. The companies are grouped by what they did in the previous twelve months, so part of the cutters' dismal record is whatever trouble forced the cut in the first place. The cut is the cough, and the pneumonia arrived earlier. Either way, the worst seat in the house was holding the company on the day it happened.
That day is the one Dividend Guardian exists for. It watches the dividends of the companies you own and the ones you're circling, and when one of them confirms a cut it tells you, with what that does to your income for the year. It sends the number, which turns out to be more useful than sympathy.
3. A dividend that never grows is shrinking, slowly
Here's the choice as it usually arrives, dressed up as a question of taste. The same A$30,000 goes into a company paying 5% that never raises it, or into one paying 3.5% that raises it 7% a year. The 5% looks better on the day you buy it. For five years it is better, and people have planned entire retirements around those five years.
Then the bills catch up, as bills do. With inflation at 2.5%, that flat A$1,500 is worth about A$915 in today's money after 20 years. It never shrank on the statement, only at the checkout. The growing dividend passes it in year six and finishes at about A$2,480 in today's money.
Show the numbers
| 3.5% growing 7% a year | 5% that never grows | |
|---|---|---|
| Now | A$1,050 | A$1,500 |
| Year 1 | A$1,096 | A$1,463 |
| Year 2 | A$1,144 | A$1,428 |
| Year 3 | A$1,194 | A$1,393 |
| Year 4 | A$1,247 | A$1,359 |
| Year 5 | A$1,302 | A$1,326 |
| Year 6 | A$1,359 | A$1,293 |
| Year 7 | A$1,418 | A$1,262 |
| Year 8 | A$1,481 | A$1,231 |
| Year 9 | A$1,546 | A$1,201 |
| Year 10 | A$1,614 | A$1,172 |
| Year 11 | A$1,684 | A$1,143 |
| Year 12 | A$1,758 | A$1,115 |
| Year 13 | A$1,836 | A$1,088 |
| Year 14 | A$1,916 | A$1,062 |
| Year 15 | A$2,000 | A$1,036 |
| Year 16 | A$2,088 | A$1,010 |
| Year 17 | A$2,180 | A$986 |
| Year 18 | A$2,275 | A$962 |
| Year 19 | A$2,375 | A$938 |
| Year 20 | A$2,480 | A$915 |
Leave inflation out and the grower still wins, just later and with less drama, and that version of the sum has its own piece.
4. Growth is easier to feel in bills than in percentages
Percentages mean very little at the kitchen table. A phone bill means a great deal. Dividend Guardian shows income as a ladder of ordinary bills, cheapest first, and a bill only counts once it's paid in full. Here are the same two dividends, climbing it.
| Bill | 5% that never grows | 3.5% that grows 7% a year | ||
|---|---|---|---|---|
| Now | Year 20 | Now | Year 20 | |
| A flat white | Covered | Covered | Covered | Covered |
| A beer at the pub | Covered | Covered | Covered | Covered |
| Music streaming | Covered | Covered | Covered | Covered |
| TV streaming | Covered | Covered | Covered | Covered |
| A Friday night takeaway | Covered | Covered | Covered | Covered |
| A coffee every week | Covered | Not coveredlost | Not covered | Coverednew |
| A haircut | Not covered | Not covered | Not covered | Coverednew |
| Phone plan | Not covered | Not covered | Not covered | Coverednew |
| Gym membership | Not covered | Not covered | Not covered | Not covered |
| Pet food | Not covered | Not covered | Not covered | Not covered |
| Bills covered | 6 | 5 | 5 | 8 |
Twenty years on, the flat dividend has quietly stopped covering your weekly coffee, the sort of loss nobody notices until they try to work out where it went. The growing one has picked up the coffee, a haircut and the phone plan. Neither company did anything you would read about in the paper. One of them just kept raising its dividend, which is about as exciting as investing gets, and about as important.
That ladder is what Guardian builds from your actual holdings and your actual bills, and it moves on the day a company confirms a change, without anybody having to ask.
5. It gives you something steadier to watch than the price
In the Hartford data the dividend growers were also the calmest group, with a standard deviation of 15.97% against 21.91% for companies that paid nothing. Calmer prices are pleasant. The real benefit is what watching the income does to the person watching.
If what you track is the payment, a falling share price stops being an emergency and becomes weather. You're far less likely to sell at the bottom, which is where most of the self-inflicted damage in investing gets done. When to sell has its own piece.
Guardian is built on the same idea. It watches dividends and declared payments and leaves the share price to everyone else. It will never send you a notification because a number went red, and its monthly summary only turns up when something actually happened.
The thing it can't promise
All five of those reasons assume the dividend keeps growing, and in Australia that assumption has failed in public, recently, to people who had long treated bank dividends as the safest income on the exchange. In 2020 the regulator asked the banks to restrict their payouts, and the income simply changed.
A long run of raises tells you what a board has done and nothing binding about what it will do next. Streaks break, usually at the worst possible moment, which is also the moment you're least likely to be paying attention. So the part of dividend growth investing that actually needs doing is unglamorous: noticing when the growth stops. Write down why you bought. Then keep an eye on the one number that tells you whether that reason is still true.
Watch the growth. Let the price do what it likes
Start free, with no account and no broker login. Paste your holdings and see what they pay over a year, which months the money lands in, and which of your bills it already covers.
If you'd rather it were watched for you, Guardian costs A$6 a month or A$60 a year. It tells you when a company confirms a change to its dividend, keeps your notes on why you bought beside those changes, and stays quiet when nothing has happened. There's a 30 day money-back guarantee.
Build my Dividend PaycheckDividend Guardian provides information and estimates from public data, not personal financial advice, and nothing here is a recommendation to buy, hold or sell anything. The Hartford figures are US history and the RBA figures run to March 2019; neither is a forecast. The A$30,000 example is arithmetic on stated assumptions, not a prediction about any company. Franking and tax depend on your own circumstances, so check them with the ATO or a registered tax agent. Guardian reports confirmed changes; it does not predict them.