Companies with sustainable competitive advantages (“wide moats”) and consistent dividend policies tend to be higher-quality businesses: more stable cash flows, higher returns on capital, high-quality balance sheets with low leverage, and historical outperformance vs no-moat peers. Morningstar’s wide-moat universe and S&P’s Dividend-Aristocrats are commonly used proxies for this quality bias.
If a company has been able to pay out consistent dividends, perhaps even increasing the dividend amount per share (DPS) over several decades, this company must have found a not only sustainable business model, but also a way of navigating the full business cycle through
DGI concentrates investors in durable, cash-generative businesses. That tends to reduce downside in bad years and deliver steadier growth of income and, over time, equity value.