For long-term investors, particularly those planning for or nearing retirement, dividend stocks offer a powerful, dual-purpose strategy: a steadily growing stream of passive income combined with the potential for capital appreciation. The key is to look beyond high current yields and focus on companies with the proven financial strength to not only maintain, but consistently increase their payouts for decades. This is the difference between an income trap and a genuine wealth-building machine.

The Power of Dividend Growth Investing

A stock that pays a dividend of 3% today, but raises that dividend by 8% every year, will ultimately provide a higher effective yield on your original investment than a stock that pays 6% but never increases its payout. This compounding of income acts as a powerful hedge against inflation and a primary engine for portfolio growth.

When selecting dividend stocks for long-term growth and retirement income, focus on three key …