3 ASX stocks with growing dividends (and why headline yields are misleading)

However, if you go to the second last row, you'll see the dividend income growth on a 10-year basis for Telstra. The dividends have fallen on a 10-year basis, and it's the same situation with NAB. So if you took the dividend that you're receiving today on Telstra and divided it by what you would've paid for Telstra 10 years ago, the effective dividend yield on your initial investment is 3.2% in the case of Telstra. If you look at the NAB, your effective dividend yield, or your dividend yield on your initial investment, is about 5.3%. So that's the two companies in the grey-shaded section there.

We'll now turn our attention to two perceived growth companies, and often people disregard growth companies under the impression that they don't pay high dividend yields or that the income that you're going to receive from those investments is going to be less compelling. However, what we're going to see from this pink section here is two companies, Altium (ASX: ALU), which is a bit topical at the moment given it's being taken over, and Pro Medicus (ASX: PME). So I'll start with Altium, and you can see that Altium, if we go to that bolded section, that bolded row, over a 10-year basis, has paid you $13,000 in dividends versus what we saw for Telstra, $4,000 odd, NAB, $5,000 odd.

The dividend yield that you are receiving now on your initial investment 10 years ago is 20.5% per annum, which is not a bad dividend yield at all, even though that headline yield today is roughly 0.8% to 1%. It's a very similar situation with Pro Medicus. Just to finalise things, I threw in there, Microsoft (NASDAQ: MSFT). Often, the technology companies in the US are perceived to be high-growth, poor dividend payers. 

But you can see, that even a very large company like Microsoft, over that 10-year timeframe, has paid similar amounts of income to Telstra and NAB, despite the fact that its headline dividend yields have always been significantly lower.

That chart, I think, or that table, although it's very detailed, I think it's worthwhile, people taking the time to understand the point there. The point is that companies might appear to have low income paid today, but the reality is, over time, if that company can grow its revenues, its earnings, and its free cash flows, then the reality is that dividends per share will grow over time as well. 

So I think it's important for investors to focus less on the income today, but on the potential for compounded income growth over time, which can very quickly justify the investment not only from a capital growth standpoint but also from an income standpoint as well.