My Concerns About Dividend Growth Stocks

My concerns about dividend growth stocks as an investment strategy...

If the tax rates on dividends increases, then investors may look for other more tax efficient investments. Companies may recognize this and decrease dividends in favor of capital gains, stock buybacks, or stockpiling cash.

Dividend stocks have also had a great run and may suffer from the "what's been working lately" analysis. In an era of declining interest rates and near zero yields on CD rates and treasuries, folks are chasing yield. If interest rates increase, the yields on CDs and treasuries will be more attractive and less risky than stocks.

The headlines are full of articles touting dividend stocks. This is usually a contrarian indicator that may warn that this investment style is closer to its end than to its beginning.

Be careful. Remember that investment themes change and rotate over time. What has worked over the recent few years often times tends to lag over the next few years.