When it comes to long-term investing, dividends are a key component of success. Roughly 90% of stock market returns come from dividends and dividend growth. Even physicist Albert Einstein called compound interest one of "the greatest mathematical discoveries of all-time." The basic idea is that compounding is the process of generating earnings on an asset's reinvested earnings. To work, it requires both the re-investment of earnings/dividends and plenty of time. It also requires finding firms that are willing to keep handing out the cash as they grow. That dividend growth typically outpaces inflation and is vital to long-term index-beating success. Conversely, dividend decreases or outright suspensions could severely hinder this process and result in poor returns or even losses. So exactly which companies are on the naughty or nice lists?

Discount Brokers Comparison: Your one-stop shop for finding the perfect broker for your investments.

The Good Guys
So far 2012 has been a good year for dividend investors. According to Standard & Poor's Dow Jones Indices, dividend net increases (increases less decreases) clocked in a roughly $8.8 billion in the third quarter of 2012. That number is supposedly a new record dividend quarterly payout for U.S. common stocks. Overall, more than 439 companies increased their dividends during the third quarter. One of those champions was energy stalwart Exxon Mobil (NYSE:XOM). The integrated oil firm increased its quarterly distribution to shareholders by 21%, making the energy company the world's biggest dividend payer. Overall, Exxon boosted its quarterly dividend to 57 cents a share - up from 47 cents. That means the company will pay more per year to shareholders than any other corporation, at nearly $10.7 billion. Not to be outdone, rival Chevron (NYSE:CVX) boosted its payment by 11%.

Paper products may seem unexciting, but boring can be good when it comes to dividends. That's evident by International Paper's (NYSE:IP) recent 14% increase to dividend payment. Fresh off its February acquisition of Temple-Inland, the global paper firm expects continued improving free cash flow (FCF) generation and earnings performance throughout the next few years. That prompted the double-digit dividend increase. CEO John Faraci said that "the dividend increase underlines [the firm's] commitment to return value to [their] shareholders."

While some retailers such as Best Buy (NYSE:BBY) have struggled in recent years, being a purveyor of cough drops, band aids and prescription medicines has helped Walgreens (NYSE:WAG) pay a dividend for the last 302 quarters and has increased that payout for the last 37 consecutive years. The latest increase was a large 22% rise of 27.5 cents a share. Walgreens' annual dividend rate over the last five years has grown from just 38 cents per share to $1.10. That's a compound annual growth rate (CAGR) of nearly 24% and exactly what dividend growth investors should look for.

The Big Cutters
However, not everything has been rosy in dividend-land. Of the approximately 10,000 U.S.-traded stocks, 53 firms decreased their dividend in Q3 of 2012. Unlike Walgreens, grocery store Supervalu (NYSE:SVU) has continued to struggle in growing sales and profits at its existing stores, as well as deal with its high debt levels. That caused the stock to plummet to an all-time low of $1.90 per share and yield a crazy 15.9%. That huge dividend was too good to be true and the firm cut its payment to zero back in July. Also feeling the pressures of a slowing economy and lower consumer spending, both RadioShack (NYSE:RSH) and J.C. Penney (NYSE:JCP). Each cut their payments down to zero. Perhaps more impressive was the huge percent cuts at KB Homes (NYSE:KBH) and Arch Coal (NYSE:ACI). Lower demand for both new construction, as well as coal, hurt the two companies in 2012. KB slashed its dividend by 60% and Arch by 73%.

The Bottom Line
Dividend growth can be one of the best ways for investors to grow wealth over the long term. However, finding those firms that deliver the goods is key. The previous list is a great example of those companies that are doing just that and those that aren't. It pays to choose wisely.

At the time of writing, Aaron Levitt did not own shares in any company mentioned in this article.