What is Growth and Income Exactly?

Every day, readers of Zacks.com are offered four new stocks that fit each of the four main styles of investing: Aggressive Growth, Growth & Income, Momentum, and Value. For those who have checked out the companies under the different categories, but may not have had the time to learn more about the style of investing related the stock being researched, I thought it would be helpful to offer more insight on the four investment styles

More in depth knowledge of each investment style translates into a better diversified portfolio.

The Education section of Zacks.com offers a plethora of detailed articles and helpful information on each style of investing. Extremely helpful are the guides for each style.

Because I write about Growth and Income stocks, I will focus on this style for this week’s Investment Idea. However, links are provided to guides for all four investment styles at the end of the article. In an effort to leave no stone unturned, we made sure that each of the links below provide a comprehensive PDF guide and a list of individual well-detailed articles on the four different styles of investing.

What to Expect with Growth and Income

Generally, a Growth and Income play will have healthy balance sheets, consistent dividend payments, quality products and services and experienced management teams. Usually Growth and Income companies are industry leaders, displaying steady earnings growth.

Companies that continually exhibit stable earnings growth, more than anything else, are ones that should hit the radar screens of Growth & Income investors. After all, companies exhibiting all of the characteristics mentioned earlier should have no problem producing a steady stream of profit growth, right? Analysts will subsequently grow more optimistic about the future earnings potential of the company and adjust their estimates up accordingly.

Growth & income investors get a dual benefit from following earnings estimate revisions. First, positive estimate revisions help investors buy shares in the companies with the best chances to outperform the market. Second, positive estimate revisions provide the easiest means to monitor the health of companies, providing a rather clear signal when the time has come to abandon ship. Companies experiencing upward estimate revisions will generally enjoy positive momentum going forward. Rarely will a stock suffer a significant price decline in the face of improving fundamentals. Add it all up and it’s clear that Growth and Income investors should only buy shares in companies enjoying upward earnings estimate revisions. The best way to harness this phenomenon is through the Zacks Rank.

Solid Growth and Income picks should carry a Zacks Rank of #1 (Strong Buy) or #2 (Buy). Check out the Guide to Growth and Income investing for more detailed information on this style of investing and the important role that the Zacks Rank plays in screening for Growth and Income stocks.

A Few of the Leaders

I have covered a wide variety of companies that fall under the Growth and Income style and have provided below some of the Zacks Rank #1 (strong Buy) names that continue to deliver strong results.

Baker Hughes Incorporated (BHI) just declared a dividend of 15 cents per share, a 15% increase from the prior quarterly dividend of 13 cents. The company is yielding 0.6%, which is an appealing industry yield as most of the companies within BHI’s industry group pay no dividends.

Wall Street reacted positively to BHI’s solid results. Thirteen out of seven covering analysts boosted full-year 2008 earnings forecasts from $5.32 per share to $5.48 in just the past week. The most accurate projection is even higher at $5.51 per share. Read our previous analysis on BHI.

Monsanto Co. (MON), a Zacks Rank #1 (Strong Buy) company, continues to outperform the industry in both the growth and income categories. MON’s earnings per share are expected to grow by 19% over the next 3 – 5 years, versus the industry average projection of 15%. The majority of the companies within Monsanto’s industry group offer no dividend, while Monsanto’s dividend yield stands at 0.8%. Read our previous analysis on MON.

Suncor Energy, Inc. (SU) has seen Wall Street increase full -year estimates on a strong second quarter. Forecasts of $3.85 per share top last month’s projections of 3.71. The most accurate expectation is a more bullish $3.99. Read our previous analysis on SU

Additional Resources

Zacks Guide to Aggressive Growth

Zacks Guide to Growth and Income

Zacks Guide to Momentum

Zacks Guide to Value

Read the full analyst report on BHI

Read the full analyst report on MON

Read the full analyst report on SU