Investing in common stocks is rarely a smooth experience. Stock prices fluctuate daily, sometimes dramatically, driven by market sentiment, economic data, and short-term news. Even company earnings, while more stable than prices, can experience cycles and periods of volatility. In this video, Chuck Carnevale, co-founder of FAST Graphs, aka Mr. Valuation explains why dividend growth investing stands out as one of the most predictable and dependable approaches for long-term investors—particularly those focused on income.
The Case for Predictability in Investing
Chuck begins by addressing a simple but important question: What is the most reliable component of stock ownership? While prices and earnings fluctuate, dividends—especially from high-quality companies—often follow a much steadier path. For many businesses, dividends increase gradually over time, creating a rising stream of income that investors can plan around.
Using FAST Graphs, Chuck walks through multiple real-world examples, including cyclical companies, moderately cyclical companies, and highly stable businesses such as utilities. Across all of these examples, the same pattern emerges: stock prices and earnings move up and down, but dividends tend to be far more consistent.
Why Dividends Matter More Than Price Volatility
One of the key points emphasized in the video is that dividends are paid based on the number of shares you own—not the stock’s current price. This means that even when market prices decline or stagnate, dividend income can remain stable or continue to grow.
Chuck shows how investors who focus on dividend growth often experience increasing yield on cost, sometimes reaching double-digit income yields years after the initial investment. In many cases, the total income received over time can rival—or exceed—what investors might have earned by chasing market returns, but with significantly less emotional stress.
Real Portfolios, Real Income Growth
The video also highlights FAST Graphs’ Income feature, which allows investors to track annual portfolio income over time. In the real portfolios shown, income increases year after year, even when some individual holdings experience price declines or temporary underperformance. The result is a portfolio that delivers a consistent “raise in pay” annually—an especially important outcome for retirees or income-focused investors.
A Practical Approach for Long-Term Investors
Chuck is careful to note that dividend growth investing is not risk-free. Companies can cut dividends, and careful analysis is still required. However, businesses with long histories of paying and growing dividends tend to offer a level of reliability that price-based strategies often lack.
The core takeaway is clear: while no investing strategy is perfect, focusing on dividend growth targets the most predictable element of stock ownership. A well-constructed dividend growth portfolio—aligned with your personal goals and risk tolerance—can provide rising income, inflation protection, and long-term peace of mind.
Disclosure: Long EMN, CMI, ES
Disclaimer: The opinions in this document are for informational and educational purposes only and should not be construed as a recommendation to buy or sell the stocks mentioned or to solicit transactions or clients. Past performance of the companies discussed may not continue and the companies may not achieve the earnings growth as predicted. The information in this document is believed to be accurate, but under no circumstances should a person act upon the information contained within. We do not recommend that anyone act upon any investment information without first consulting an investment advisor as to the suitability of such investments for his specific situation.
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