If I where to use my example of $50 stock, yielding 2,5% and increasing that dividend each year with 8%.
These are conservative numbers.
For the company to keep that 2,5% dividend, the stock price would have to increase 8 % each year to match that dividend. The price would of course fluctuate, but investors would buy more as its dividend where rise to 3-4% ( stock price falling ), and would stabalize around 2,5% again.
So, after 15 years, the stock I purchased at $50, is now worth $159, still yielding 2,5% ( or $3,97 ) "right now", but my yield on cost is 7,94%.
Now, if I where to increase this amount with reinvesting my dividends, my numbers and dividends would increase each year.
So the stock has trippeld in value, and payed me $38 for just holding onto it during those years. If I needed to, I could sell it, like one would do with index fund.. but if its a healty company likely surviving for another 100 years, why not just let the dividends come in each quarter?