Why is it important to understand a company’s dividend history?

As Fidelity’s former Magellan Fund manager Peter Lynch said, “The dividend is such an important factor in the success of many stocks that you could hardly go wrong by making an entire portfolio of companies that have raised their dividends for 10 or 20 years in a row.” Companies that consistently increase their dividends are sending a signal to investors that their cash flow is not stagnating and that they are optimistic about their future prospects.