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These durable dividend growers all typically have four common characteristics: Resilient cash flows: Companies need steady cash flows to sustain their dividends during downturns. This can come from regulated rate structures, recurring revenues, or stable demand. A conservative payout ratio: Most companies should pay out only 30%-50% of their income, or up to 75% in highly durable industries, to ensure they can sustain their dividends and retain enough cash to grow their business. Strong balance sheet: Dividend growers usually have solid, investment-grade bond ratings, which give them greater flexibility to grow and maintain their dividends during tough times. Operate in growth industries: Companies should be in sectors benefiting from long-term growth trends, not in dying industries. How to build a $1 million dividend stock portfolio You should look to build a diversified portfolio of 10 to 25 proven dividend growers with those four crucial characteristics. Ideally, you should buy companies that have delivered at least a decade of annual dividend increases. Another good target is companies that have grown their dividends by at least a mid-single-digit annual rate over the past five years. You should also hold companies across several industries, as this diversification will help reduce risk. Individual stock picking isn't for everyone. A good alternative option is to invest in an exchange-traded fund (ETF) focused on high-quality dividend stocks. For example, the Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD) holds 100 top dividend stocks. It tracks an index that screens companies based on four dividend quality characteristics, including their five-year dividend growth rate. At its last annual reconstitution this past March, its 100 holdings had increased dividends at an average annual rate of 8.4% over the past five years. The Schwab U.S. Dividend Equity ETF's focus on dividend growth stocks has paid off over the long term. The fund has delivered a 12.4% average annual return since its inception in 2011. Get rich slowly on dividend stocks Investing in dividend stocks is a proven wealth growth strategy. While they won't make you rich overnight, they can slowly enable you to become a millionaire. The key is investing in the right dividend stocks, as steady dividend growers have delivered the best long-term returns. Should you buy stock in Schwab U.S. Dividend Equity ETF right now? Before you buy stock in Schwab U.S. Dividend Equity ETF, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Schwab U.S. Dividend Equity ETF wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $590,357!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,141,748!* Now, it’s worth noting Stock Advisor’s total average return is 1,033% — a market-crushing outperformance compared to 193% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors. *Stock Advisor returns as of October 20, 2025 Matt DiLallo has positions in Schwab U.S. Dividend Equity ETF. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. How to Become a Dividend Millionaire was originally published by The Motley Fool
