One of the keys to outperforming the market's average -- whether that be a traditional corporation or a REIT -- is consistent dividend growth. Companies that routinely increase their dividends produced a 12.9% total annual return from early 1972 through the end of last year, according to data from Ned Davis Research and Hartford Funds. That outperformed both the S&P 500's average (12.3%) as well as that of companies that didn't change their dividend policy (11.9%). Because of that, investing in companies that routinely increase their dividends has proven to be a much more rewarding strategy than chasing yield.
Take the case of Realty Income (NYSE: O), which has tailored its approach to meeting the needs of income-seeking investors. Billed as "The Monthly Dividend Company," the REIT has paid a dividend like clockwork for 602 consecutive months. However, instead of just providing bond-like income stability, Realty Income has dialed things up a notch by consistently raising its payout. It has increased its dividend for 91 straight quarters, growing it by a 4.5% compound annual rate. All that growth has paid big dividends for its investors as the REIT has produced a market-smashing 15.3% average annual total return since its public listing in 1994. Not bad for a retirement-focused dividend stock.