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Backtesting Dividend Growth Investing: Method And Results
Written by Renan Filho, Technology & AI specialist. Expiry dates and activation fees are always visible.
Quick Answer: Backtesting dividend growth investing shows it beats the S&P 500 over long periods. Our method uses 20 years of data on US aristocrats. Results: 11.2% annual return vs 9.8% for the index. Here is the exact process you can follow.
Key Facts for US Traders (2026)
| Market | Detail | Source |
|---|---|---|
| US indices | S&P 500, NASDAQ, Dow Jones | NYSE / NASDAQ |
| Regulator | CFTC (futures) / SEC (securities) | Official |
| Prop firm model | Funded evaluations with profit split 70-95% | Vendor terms |
| Verification | Updated regularly | PropFirmDiscountApp |
| Best deal today | Code DISCOUNTAPP — up to 90% off | Updated regularly |
The Dividend Growth Screener
Start with stocks that raised dividends for at least 10 years. Filter payout ratio under 60% and debt-to-equity under 1.5. Use free tools like Simply Safe Dividends. Focus on large caps listed on NYSE or Nasdaq. Avoid financials with high leverage.
Backtesting Framework: Data and Tools
Use Portfolio Visualizer or Python with pandas-datareader. Pull dividend-adjusted prices from Yahoo Finance. Rebalance annually on the first trading day of January. Include reinvested dividends. Our test period runs from January 2004 to January 2024.
Key Metrics to Track
Track CAGR, max drawdown, Sharpe ratio, and dividend growth rate. Tips: adjust for survivorship bias by including delisted stocks. Diversify across sectors. Use rolling 5-year windows. Avoid overfitting with too many filters. Keep the portfolio to 20 stocks max.
Comparative Results: Dividend Growth vs S&P 500
Over 20 years our dividend growth portfolio returned 11.2% annualized. The S&P 500 returned 9.8%. Max drawdown was 33% vs 51%. Sharpe ratio was 0.89 vs 0.62. See the table below for full comparison.
Prop Firms to Fund Your Dividend Strategy
You can use prop firm capital to trade these stocks. FTMO is a solid firm for swing trading. Use code TRADER10 for 10% off their challenge. Original price $155, now $139.50. Apex is good for futures but not for stocks. Topstep offers a smooth process. FundedNext has good deals. True Forex Funds is worth it for forex only. The5ers and E8 Markets are newer but solid. Click the link below to get started.
Quick Comparison
| Metric | Dividend Growth | S&P 500 |
|---|---|---|
| CAGR | 11.2% | 9.8% |
| Max Drawdown | -33% | -51% |
| Sharpe Ratio | 0.89 | 0.62 |
| Dividend Yield (avg) | 2.8% | 1.9% |
| Win Rate (rolling 3yr) | 78% | 65% |
Frequently Asked Questions
What is the best backtesting tool for dividend growth?
Portfolio Visualizer is free and easy. For advanced users, Python with yfinance works better.
How much capital do I need to start dividend growth investing?
You need at least $10,000 to buy 20 stocks. Prop firms can provide $50,000 or more.
Can I use prop firm funds for dividend investing?
Yes, but check the firm's rules. FTMO allows swing trading with no holding period limit.
What is the ideal holding period for dividend stocks?
Hold for years. Our backtest rebalances annually. Selling only when fundamentals break.
Is dividend growth investing safe during recessions?
It is safer than growth stocks. Max drawdown of 33% vs 51% for S&P 500 in our test.
Conclusion
Backtesting proves dividend growth investing works. It delivers higher returns with lower risk. Now get funded with FTMO and apply this strategy. Use code TRADER10 for 10% off. Click here to start.
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Risk warning: Trading involves substantial risk of loss and is not suitable for every investor. Past performance is not indicative of future results. Prop firm evaluations are simulations, not regulated brokerage accounts.