Dividend growth stocks are companies that raise their dividend year after year. The starting yield is often modest, but the income keeps climbing, and so does the share price over time. In this guide I look at the top dividend growth stocks in the UK to watch in 2026, why they work so well and how to use them to build a rising income.
Why Dividend Growth Beats a High Yield
A high yield looks great today. However, if the payout never grows, inflation slowly eats away at it. A company that raises its dividend by 7% a year, on the other hand, doubles your income in about ten years without you adding a penny.
Investors call this your yield on cost. Buy a share yielding 3% and, if the dividend doubles, you are earning 6% on what you originally paid. Better still, companies that can raise their payout every year are usually high quality businesses, so the share price tends to rise too.
Top UK Dividend Growth Stocks to Watch in 2026
These FTSE 100 companies have some of the longest records of dividend increases in the UK. Yields are based on the last 12 months of dividends and share prices on 14 October 2026, so check the latest figures before you buy. This is not financial advice. Our dividend income calculator shows how much you would need to invest for a target income.
| Company | What it does | Years of dividend growth | Approx. yield |
|---|---|---|---|
| Spirax Group | Steam and fluid engineering | More than 55 | 2.3% |
| Halma | Safety and health technology | 46 | 0.7% |
| Sage Group | Accounting software | 35 | 2.1% |
| Croda International | Speciality chemicals | 34 | 3.1% |
| BAE Systems | Defence | 22 | 2.0% |
Spirax Group
Spirax makes steam systems, pumps and heating equipment used in factories, hospitals and food plants. It has raised its dividend every year for more than half a century, one of the longest records on the London Stock Exchange. Demand can dip when industry slows, yet the payout has kept rising.
Halma
Halma owns dozens of smaller businesses making fire detectors, safety sensors and medical equipment. It has grown its dividend for 46 years in a row. The yield is tiny because the share price has risen so much, which shows that dividend growth stocks often reward you through capital growth as well.
Sage Group
Sage provides accounting and payroll software to small and medium businesses. Customers pay monthly subscriptions, so cash comes in steadily. That predictable income has supported 35 years of dividend increases.
Croda International
Croda makes speciality ingredients for beauty products, crops and medicines. Profits have been under pressure lately, which has pushed the yield up to around 3.1%. Even so, it has kept its 34 year record of dividend increases intact.
BAE Systems
BAE is Europe’s largest defence company. With governments around the world spending more on defence, demand for its products is strong. It has raised its dividend for 22 years running, although ethical investors may prefer to avoid it.
What Dividend Growth Looks Like in Real Money
Say you put £10,000 into a share yielding 2.5%. In year one, that pays you £250. If the company then grows its dividend by 8% a year, your income looks very different over time.
| Year | Annual dividend | Yield on your original £10,000 |
|---|---|---|
| Year 1 | £250 | 2.5% |
| Year 10 | About £500 | About 5% |
| Year 20 | About £1,080 | About 10.8% |
That is before you reinvest a single dividend. Put the payouts back into more shares and the numbers climb even faster. This is why patient investors love dividend growth stocks.
How to Spot Good Dividend Growth Stocks
A long record is a great start, but it is no guarantee. Here is what to look for before you buy.
Step 1: Check Earnings Are Growing Too
A dividend can only grow faster than profits for so long. Look for companies where earnings per share are rising over five to ten years, not just the payout.
Step 2: Look for a Sensible Payout Ratio
The payout ratio is the share of profits paid out as dividends. Below about 60% leaves room for future rises. Above 80% means there is little margin if profits fall.
Step 3: Favour Strong Competitive Positions
The best dividend growth stocks usually have something rivals cannot easily copy, like a trusted brand, sticky customers or specialist know how. That is what lets them raise prices and keep growing.
Dividend Growth or High Yield: Which Is Better?
It depends on when you need the income. If you are 20 or 30 years from retirement, dividend growth stocks usually win, because the income has decades to compound. If you need cash now, high yield dividend stocks pay more from day one.
Many investors hold a mix of both. Whichever you choose, keep them inside a stocks and shares ISA, so every pound of dividend is tax free.
Build a Rising Income With Dividend Growth Stocks
Dividend growth stocks are one of the simplest ways to build an income that beats inflation. Pick quality companies with a long record, check that profits are rising, reinvest the dividends and give it time.
To see how small, regular amounts snowball over the years, take a look at our guide to compound interest.