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Dividend Growth Investing Faces New Challenges

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  Published in Stocks and Investing on Tuesday, February 10th 2026 at 21:16 GMT by WTOP News
      Locales: District of Columbia, New York, UNITED STATES

The Rise of Dividend Growth Investing & its Modern Challenges

Dividend growth investing - the strategy of buying companies with a history of increasing dividends - has become increasingly popular. This is due, in part, to the aging population and the growing need for reliable income streams in retirement. Furthermore, dividend income can provide a cushion against market volatility. However, maintaining dividend growth requires sustained earnings growth, which is becoming harder to achieve in a slowing global economy.

Looking at the companies mentioned, the past few years have presented interesting tests. 3M, for example, faced significant legal challenges related to PFAS contamination, impacting its financial performance and dividend growth rate. While the company remains a dividend payer, its stock price has experienced volatility, demonstrating that even historically reliable stocks aren't immune to disruption. Similarly, the telecommunications landscape is shifting rapidly with the deployment of 6G technologies and increased competition from newer players. Both Verizon and AT&T are investing heavily in infrastructure upgrades, but these investments strain cash flow and could potentially impact future dividend increases.

Sector-Specific Dynamics in 2026

• Consumer Staples (P&G, Coca-Cola): While these companies benefit from consistent demand for essential goods, they are facing increasing pressure from private label brands and changing consumer preferences. Inflationary pressures in 2024 and 2025 forced them to raise prices, which could lead to a shift in consumer buying habits. Successful navigation of these changes will be key to sustaining dividend growth.
• Healthcare (JNJ): The healthcare sector remains relatively stable, but faces regulatory scrutiny and pricing pressures. Johnson & Johnson's recent corporate restructuring, including the spin-off of its consumer health division, highlights the need for adaptation and innovation to maintain its competitive edge.
• Industrials (3M): As mentioned, 3M's legal liabilities represent a significant headwind. The company's ability to diversify its product portfolio and resolve these issues will be crucial.
• Telecommunications (VZ, T): The 5G rollout has been slower than anticipated, and the cost of infrastructure investments is substantial. Competition is fierce, and both Verizon and AT&T are exploring new revenue streams, such as enterprise solutions and fixed wireless access, to offset declining legacy revenues.
• Real Estate (Realty Income): While REITs offer attractive dividend yields, they are sensitive to interest rate fluctuations. Rising interest rates can increase borrowing costs and decrease property values. The pandemic also highlighted the risks associated with certain retail segments, requiring REITs to adapt their portfolios to focus on more resilient property types.

Beyond the Seven: Emerging Opportunities

While the seven stocks listed remain compelling, investors should also consider emerging opportunities in sectors like renewable energy (companies with stable, long-term contracts), cybersecurity (growing demand for data protection), and healthcare innovation (biotech companies with promising pipelines). However, these newer sectors often come with higher risk profiles.

Due Diligence is Paramount

Before investing in any dividend stock, it's crucial to conduct thorough due diligence. This includes analyzing the company's financial statements, evaluating its competitive position, and assessing the sustainability of its dividend payout ratio. A low payout ratio indicates that the company has ample room to continue paying and potentially increase its dividend, even during challenging times. Investors should also consider the company's debt levels and its ability to generate free cash flow.

Disclaimer: Investing in dividend stocks involves risk. Past performance is not indicative of future results. Please consult with a financial advisor before making any investment decisions.