Should you be a growth investor or a dividend investor?

Should you be a growth investor or a dividend investor? The former focuses on prospective investments with high earnings growth potential, but lays little focus on dividends. The latter looks for cash cows that would generate stable dividend receipts. But what if you can have the best of both the approaches? Yes, we are referring to dividend growth investing, which is like eating the cake and keeping it too. If you were to look at Warren Buffett's investment track record, you would find many investments that fit into this category. In fact, an article in seekingalpha.com points out some insightful data from the current Berkshire Hathaway portfolio. Of the 43 publicly owned companies in the portfolio, 32 companies pay dividends. It is worth noting that over three-fourth of the total portfolio value is accounted by the top 8 companies. And all of these are dividend payers.

What is the secret behind dividend growth companies? These are typically businesses that have strong long term growth potential and are cash generating machines. In other words, the incremental capital required to grow these businesses is minimal. So if you want to be a successful dividend growth investor, zero down stocks that have these basic characteristics and buy them when they're available at a bargain price.