Is a Growing Dividend More Important Than a High Yield?
If you're a dividend investor, a dilemma you may end up reaching is whether you're better off investing in a company that pays a high yield today, or one that has a lower yield but has been increasing its dividend over the years and is likely to continue doing so. Over time, the dividend growth stock may end up being the higher-yielding investment.
But just how long could it take for that to be a reality? Below, I'll compare big-box retailer Costco Wholesale (NASDAQ: COST), which has been aggressively increasing its payouts, with healthcare giant CVS Health (NYSE: CVS), which hasn't often raised its dividend but offers a notably higher yield today.
CVS Health currently pays a dividend yield of 2.7%. It did raise its dividend recently by 10%, but by and large, this isn't a stock known for regular rate hikes. And with the company being in acquisition mode right now, I wouldn't expect that to change. CVS may be inclined to use its available free cash flow to help with its long-term growth rather than spending more of it on an already high yield (the S&P 500 has a yield of only 1.6%).
Source Fool.com
