My Top 10 Favorite Dividend Growth Stocks

Every investor has a handful of companies they simply trust more than the rest.

After years of researching hundreds of dividend-paying businesses, these are mine.

If I could only build a portfolio around ten dividend growth stocks, these would be the companies I would choose.

These aren't necessarily the highest-yielding stocks.

They aren't always the fastest growers.

And they certainly aren't always the cheapest.

But they are the companies that have earned my highest level of confidence.

Why These Ten Are Different

The DGI Crab framework is built around discipline.

I generally buy stocks when they're yielding comfortably above their four-year average dividend yield.

I generally buy stocks that fit my current investing tier based on my age and time horizon.

Those rules are the foundation of my investing strategy.

But these ten companies have earned a little flexibility.

Not because the rules don't matter.

Because these businesses have repeatedly proven they're worthy of bending them.

Warren Buffett Said It Best

One of my favorite investing quotes comes from Warren Buffett:

"It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price."

I think these ten companies embody that philosophy.

Would I love to buy them when they're trading 30% above their four-year average dividend yield?

Absolutely.

But the reality is that many of these businesses rarely become that undervalued.

If I insist on waiting for the perfect opportunity every single time, I may spend years watching exceptional companies while never building meaningful positions.

Sometimes, a fair price for a truly exceptional business is better than a spectacular bargain on a company I don't have the same conviction in.

Rule #1 I Bend: Valuation

One of the cornerstones of the DGI Crab strategy is comparing today's dividend yield to the stock's four-year average dividend yield.

When today's yield is comfortably above that historical average, the stock is often trading at an attractive valuation.

That's still my preferred way to invest.

But with these ten companies, I'm willing to accept a good opportunity instead of waiting for the perfect one.

These businesses simply don't spend much time on the bargain shelf.

I'd rather continue building meaningful positions in extraordinary companies than miss years of ownership while waiting for an opportunity that may never arrive.

Rule #2 I Bend: The Tiers

The DGI Crab framework is intentionally organized into age-based tiers.

I still believe that's the best way for most investors to build wealth.

But these ten companies are special.

If I were 20 years old and Procter & Gamble or Coca-Cola became attractively valued, I wouldn't ignore them simply because they're Tier Three holdings.

Likewise, if I were 45 years old and Visa, Microsoft, or Waste Management became significantly undervalued, I wouldn't pass them by just because they're classified as Tier One.

The tiers remain my guide.

They simply aren't absolute when it comes to the very best businesses.

What These Companies Have in Common

At first glance, these companies don't seem very similar.

Technology.

Consumer staples.

Healthcare.

Energy.

Railroads.

Restaurants.

Financial services.

Waste collection.

But underneath the surface, they all share the same characteristics.

They're leaders in their industries.

They generate enormous amounts of cash.

They have shareholder-friendly management teams.

They've rewarded investors through years — often decades — of consistent dividend growth.

And perhaps most importantly...

I can sleep well at night owning them.

That's a quality that's difficult to measure, but incredibly valuable over a lifetime of investing.

Even My Favorites Have Limits

Don't misunderstand this article.

I'm not saying valuation no longer matters.

It absolutely does.

Even the greatest company can become overpriced.

I'm simply saying that my margin for waiting becomes a little smaller when I'm dealing with businesses of this caliber.

The difference between a good price and a perfect price isn't nearly as important as owning exceptional companies for decades.

Don't Build a Portfolio of Exceptions

One final thought.

This list contains only ten companies for a reason.

Exceptions should remain rare.

If every stock becomes an exception to your investing rules, then your rules no longer exist.

For the overwhelming majority of my portfolio, I still follow the DGI Crab framework exactly as I've described throughout this website.

These ten companies have simply earned a little extra trust.

Final Thoughts from the DGI Crab

The DGI Crab framework is built on discipline.

Discipline creates consistency.

Consistency creates wealth.

But investing is also about recognizing extraordinary businesses when you find them.

These ten companies have earned my confidence through decades of execution, innovation, shareholder-friendly management, and consistent dividend growth.

I'll still look for value.

I'll still compare today's yield to the four-year average yield.

I'll still invest patiently.

But when one of these companies gives me a reasonable opportunity, I'm willing to bend my own rules just a little.

Because over a lifetime of investing, owning more shares of an exceptional business has often proven to be one of the best decisions an investor can make.

The DGI Crab strategy teaches discipline — but these ten companies have earned the privilege of a little flexibility.