If a company commits to a progressive dividend policy then it is pledging to grow the dividend each year. Like stable dividends, the payout is linked to long-term earnings forecast for the business. The main difference is that, if earnings grow, then a progressive policy aims to raise the dividend by a similar amount, but if earnings fall the company will still raise the payout.
This is a popular policy for investors as it virtually guarantees higher dividends each year regardless of how the business performs. However, if a company has a progressive payout and is struggling then questions can be raised about how sustainable the policy is and the justification of spraying shareholders with cash if it doesn’t have the resources to. A company’s share price can find support if it demonstrates an ability to deliver a progressive payout over a longer period of time but it does severely limit a company’s flexibility if business deteriorates.