Dividend growth is the annual percentage increase in a company's dividend. CAGR formula: (Current_Div / Initial_Div)^(1/years) − 1. At 10% CAGR, dividends double every 7.2 years (Rule of 72). Impact on Yield on Cost: a 3% starting yield growing at 10%/year becomes 7.8% YOC after 10 years. In hard assets: variable dividends can show 50–200% “growth” in boom years.
MB Capital Strategies Glossary — Updated June 2026
Dividend Growth Investing (DGI) is a long-term income strategy: you buy stocks that pay and grow their dividends over time, hold them, reinvest dividends, and allow Yield on Cost (YOC) to compound to a level that creates passive income sufficient to replace earned income — financial freedom.
The core insight: a 4% dividend yield on a stock that grows its dividend by 8%/year becomes a 19% yield on your original cost after 20 years — without requiring any capital gains.
Example: 5% initial yield, 7% annual dividend growth → YOC doubles in ~10 years to 10%. After 20 years: ~19% YOC. This is the dividend snowball effect — compounding dividend income on a fixed cost basis.
Use the Dividend Growth Calculator to model your own scenarios.
Two distinct approaches exist within dividend investing:
| Approach | Initial Yield | Growth Rate | Who Uses It |
|---|---|---|---|
| Dividend Growth (DGI) | 2–5% | 5–15% p.a. | Long-horizon accumulators (20+ years) |
| High-Yield Income | 6–20% | 0–5% p.a. | Income-focused, shorter horizon |
| Hard-Asset Hybrids | 4–12% | Cyclical (not linear) | Active income investors like Marco |
Traditional DGI focuses on "dividend aristocrats" — companies with 25+ years of consecutive dividend growth. Marco's approach adds a third column: hard-asset stocks (shipping, mining, energy, pipelines) that don't fit neatly into either category but generate enormous cash flows at the right point in the cycle.
Conventional DGI wisdom says avoid cyclical dividend payers — their dividends get cut in downturns. Marco's counter-thesis: the right entry price in a hard-asset cycle generates such high initial yields (8–20%) that even a 50% dividend cut leaves you earning more than the S&P 500 average yield.
A high dividend yield is only valuable if it's sustainable. Marco's checklist for dividend safety:
DRIP (Dividend Reinvestment Plan) accelerates YOC compounding by purchasing additional shares with each dividend — which then generate their own dividends. The DRIP Calculator shows exactly how portfolio income grows under different reinvestment assumptions. For a full theoretical grounding, read our DRIP Investing Guide → Compounding & YOC.
At 8% dividend yield with full reinvestment and no price appreciation, a portfolio doubles in income-generating power in approximately 9 years (Rule of 72: 72 ÷ 8 = 9).
On this site, a YOC of ≥8% on the original cost basis is highlighted as a meaningful milestone — it means the investment is effectively returning more than 8% of its purchase price annually in cash. Sectors where this is achievable in the current cycle:
Not every dividend growth story stays on track. Marco's early-warning indicators for dividend deterioration in hard-asset stocks:
The shipping sector adds one more layer: when spot rates collapse below operating costs for an extended period, even companies with strong NAV will redirect cash flow to debt service rather than dividends. The 2022–2023 dry bulk market gave a textbook example.
Marco's portfolio construction for dividend income combines three overlapping buckets:
| Bucket | Stocks | Expected Yield | Expected Growth |
|---|---|---|---|
| Core Compounders | Enbridge, Pembina, TC Energy | 5–7% | 3–5% p.a. |
| Cyclical Income | FLEX LNG, CMB.Tech, TORM, Hafnia | 7–15% | Variable (cycle) |
| Special Opportunity | Thungela, B2Gold, Panoro | 8–20% | Irregular specials |
The Core Compounders provide the steady compounding base. The Cyclical Income bucket generates the headline yield spikes — particularly useful when cycle timing is right. The Special Opportunity positions offer asymmetric upside when commodity cycles turn.
There is no universal "right" dividend CAGR. Context matters:
The key insight for hard-asset investors: a 40% dividend yield in Year 1 (cycle peak), followed by a 70% cut in Year 2 (cycle trough), still delivers more total cash over 5 years than a 4% yield growing at 7% compounded — if you entered at the right price.
Not all dividend growth is created equal. In the hard-asset space, companies can show apparent dividend growth that is purely cyclical rather than structural. Here is Marco's framework for distinguishing the two:
| Characteristic | Structural Growth | Cyclical Spike |
|---|---|---|
| Dividend policy | Formula-based or increasing floor | % of net income / FCF |
| Track record | 10+ consecutive years of growth | 3-5 year rate cycle |
| Revenue driver | Volume growth / contracts / pricing power | Commodity/freight rate |
| Examples | Enbridge, Realty Income, FLEX LNG (TC-backed) | TORM, BHP, Thungela 2022-24 |
| YOC strategy | Buy at 4-6% yield, grow to 8-15% YOC over 10yr | Buy at cycle trough ≥8% yield, collect peak cycle |
Both approaches work — they just require different entry points and holding strategies. FLEX LNG's 19th consecutive quarterly dividend of $0.75/share in June 2026 represents structural predictability (95% TC coverage) rather than cyclical luck, making it a rare shipping stock with growth-stock-like dividend reliability.
For the broader dividend growth universe: companies like CMB.Tech are building structural dividend capacity through fleet diversification (VLCCs, Suezmaxes, chemical tankers, ammonia vessels) that should provide less cyclical volatility over time than pure tanker operators. The $0.64/share dividend payable June 10, 2026 is part of this thesis. CMB.Tech June 2026 Dividend Analysis →
Most dividend growth frameworks assume a consumer staples, utility, or healthcare stock that raises dividends annually at 5-10% per year over decades. Hard asset sectors — particularly shipping — work differently. Shipping dividends are often variable (tied to spot earnings) or semi-fixed with special top-ups. This means YOC calculations for shipping stocks require different assumptions than for a Coca-Cola or Realty Income: rather than projecting an annualized CAGR, investors should model a weighted average payout across the cycle. For example, if TORM paid $0.70/quarter at the cycle peak but an investor entered at $20/share, the peak YOC was 14%. If rates normalize to half of peak levels, the sustainable YOC might be 7-8% — still strong, but very different from the peak. The implication: for shipping dividend growth investing, the relevant question is not "how fast does the dividend grow?" but "what is the mid-cycle sustainable payout, and what base price creates a YOC above 8%?" This is the approach Marco Bozem uses at MB Capital Strategies when evaluating shipping holdings. See the Shipping Triple Payday June 2026 article for a live example of this mid-cycle payout analysis across TORM, FLEX LNG, and BW LPG, and use our YOC Calculator to model your personal entry point.
Independent hard-asset investor. Covers shipping, mining & energy dividends from a real private-investor portfolio.
Read next: 6 Shipping Dividend Stocks: Portfolio & FCF Coverage →
