Dividend growth investing is not the type of investing where investors find the need to jump in and out of stocks multiple times a year.
With that said, will dividend growth investors find the need to sell their equities at times during their investment career, absolutely. In a perfect world, the investor would be able to “set it and forget it.” The investor would reinvest their dividends or take the dividends as income and never think about their investments again.
The reality of modern investing is that the ever-changing habits of people and the speed at which economies can turn will not allow the “forget it” part of the phrase. Companies get bought out and products and services can fall out of favor. Innovation, need, and a company’s ability to capitalize on consumer spending habits are the keys to growth. When that innovation and need no longer exist or a company fails to listen to their customers, you can bet that revenue will begin trending downward.
No company and therefore no investor can sit idle and expect perfect performance decade in and decade out. There will be times that actions will need to be taken in a portfolio. Does this mean that an equity no longer belongs in your portfolio, of course not? Don’t go from zero to sixty in three seconds from what you hear on financial news networks.
Dividend growth investors generally invest in companies that have deep moats. By that, they are companies whose products or services can and have survived decades of economic, social, and political unrest. They sell products and services that the population uses or needs day in and day out. More and more, those companies do more than sell food, beverage, and healthcare products. More and more, technology companies are joining that list.
Dividend growth investors will generally add to their shares when prices drop and raise their dividend yield on cost. Every few years, they add companies that fit their criteria and sell companies that fail to perform for an extended period. Over the long run, the majority of their equities stay put, grow their dividend, and their dividends are reinvested.