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The easy money policies are increasing the appeal for dividend investing. Though the strategy doesn’t offer dramatic price appreciation, it is a major source of consistent income for investors in any type of market. Honing in on stocks with a history of dividend growth leads to a healthy portfolio, with greater scope of capital appreciation as opposed to simple dividend-paying stocks or those with high yields.
Why is Dividend Growth Better?
Stocks that have a strong history of dividend growth belong to mature companies, which are less susceptible to large swings in the market, and thus act as a hedge against economic or political uncertainty as well as stock market volatility. At the same time, these offer downside protection with their consistent increase in payouts.
Additionally, these stocks have superior fundamentals that make dividend growth a quality and promising investment for the long term. These include a sustainable business model, a long track of profitability, rising cash flows, good liquidity, a strong balance sheet and some value characteristics. Further, a history of strong dividend growth indicates that dividend increase is likely in the future.
Although these stocks do not necessarily have the highest yields, they have outperformed for a longer period than the broader stock market or any other dividend-paying stock.
As a result, picking dividend growth stocks appears as a winning strategy when some other parameters are also included.
5-Year Historical Dividend Growth greater than zero: This selects stocks with a solid dividend growth history.
5-Year Historical Sales Growth greater than zero: This represents stocks with a strong record of growing revenue.
5-Year Historical EPS Growth greater than zero: This represents stocks with a solid earnings growth history.
Next 3–5 Year EPS Growth Rate greater than zero: This represents the rate at which a company’s earnings are expected to grow. Improving earnings should help companies sustain dividend payments.
Price/Cash Flow less than M-Industry: A ratio less than M-industry indicates that the stock is undervalued in that industry and that an investor needs to pay less for better cash flow generated by the company.
52-Week Price Change greater than S&P 500 (Market Weight): This ensures that the stock appreciated more than the S&P 500 over the past year.
Top Zacks Rank: Stocks having a Zacks Rank #1 (Strong Buy) and 2 (Buy) generally outperform their peers in all types of market environments.
Growth Score of B or better: Our research shows that stocks with a Growth Score of A or B when combined with a Zacks Rank #1 or 2 offer the best upside potential.
P/E Ratio Less than X-Industry: A ratio less than X-industry indicates that the stock is cheap and undervalued in that industry.
Just these few criteria narrowed down the universe from over 7,700 stocks to just 13.
Here are five of the 13 stocks that fit the bill:
Colorado-based TeleTech Holdings Inc. (TTEC - Free Report) is a customer experience, technology and services company that focuses on the design, implementation and delivery of customer experiences. The company has a P/E ratio of 22.31 compared with the industry average of 34.73. Its earnings are expected to grow 51.8% this year. The stock has a Zacks Rank #1 and Growth Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.
Massachusetts-based Thermo Fisher Scientific Inc. (TMO - Free Report) is a provider of analytical instruments, equipment, reagents and consumables, software, and services for research, manufacturing, analysis, discovery, and diagnostics worldwide. It has a P/E ratio of 25.11 compared with the industry average of 57.24 and an expected earnings growth rate of 46.5% for this year. The stock has a Zacks Rank #2 and Growth Score of B.
Minnesota-based Best Buy Company Inc. (BBY - Free Report) is a multinational specialty retailer of consumer electronics, home office products, entertainment software, communication, food preparation, wellness, heath, security, appliances and related services. The company has a P/E ratio of 16.45 compared with the industry average of 17.03. Its earnings are expected to grow 18% this year. The stock has a Zacks Rank #2 and Growth Score of A.
Ohio-based ParkerHannifin Corporation (PH - Free Report) is a global diversified manufacturer of motion & control technologies and systems. The company has a P/E ratio of 22.41 compared with the industry average of 28.20 and an expected earnings growth rate of 9.6% for the fiscal year (ending Jun 2021). It has a Zacks Rank #2 and Growth Score of B.
Utah-based Nu Skin Enterprises Inc. (NUS - Free Report) develops and distributes a wide range of premium cosmetics, beauty, personal care and wellness products. The company has a P/E ratio of 15.03 compared with the industry average of 39.20. Its earnings are expected to grow 9.3% this year. It has a Zacks Rank #1 and Growth Score of A.
You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and test them first before taking the investment plunge.
The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
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5 Top Dividend Growth Stocks to Buy on the Cheap
The easy money policies are increasing the appeal for dividend investing. Though the strategy doesn’t offer dramatic price appreciation, it is a major source of consistent income for investors in any type of market. Honing in on stocks with a history of dividend growth leads to a healthy portfolio, with greater scope of capital appreciation as opposed to simple dividend-paying stocks or those with high yields.
Why is Dividend Growth Better?
Stocks that have a strong history of dividend growth belong to mature companies, which are less susceptible to large swings in the market, and thus act as a hedge against economic or political uncertainty as well as stock market volatility. At the same time, these offer downside protection with their consistent increase in payouts.
Additionally, these stocks have superior fundamentals that make dividend growth a quality and promising investment for the long term. These include a sustainable business model, a long track of profitability, rising cash flows, good liquidity, a strong balance sheet and some value characteristics. Further, a history of strong dividend growth indicates that dividend increase is likely in the future.
Although these stocks do not necessarily have the highest yields, they have outperformed for a longer period than the broader stock market or any other dividend-paying stock.
As a result, picking dividend growth stocks appears as a winning strategy when some other parameters are also included.
5-Year Historical Dividend Growth greater than zero: This selects stocks with a solid dividend growth history.
5-Year Historical Sales Growth greater than zero: This represents stocks with a strong record of growing revenue.
5-Year Historical EPS Growth greater than zero: This represents stocks with a solid earnings growth history.
Next 3–5 Year EPS Growth Rate greater than zero: This represents the rate at which a company’s earnings are expected to grow. Improving earnings should help companies sustain dividend payments.
Price/Cash Flow less than M-Industry: A ratio less than M-industry indicates that the stock is undervalued in that industry and that an investor needs to pay less for better cash flow generated by the company.
52-Week Price Change greater than S&P 500 (Market Weight): This ensures that the stock appreciated more than the S&P 500 over the past year.
Top Zacks Rank: Stocks having a Zacks Rank #1 (Strong Buy) and 2 (Buy) generally outperform their peers in all types of market environments.
Growth Score of B or better: Our research shows that stocks with a Growth Score of A or B when combined with a Zacks Rank #1 or 2 offer the best upside potential.
P/E Ratio Less than X-Industry: A ratio less than X-industry indicates that the stock is cheap and undervalued in that industry.
Just these few criteria narrowed down the universe from over 7,700 stocks to just 13.
Here are five of the 13 stocks that fit the bill:
Colorado-based TeleTech Holdings Inc. (TTEC - Free Report) is a customer experience, technology and services company that focuses on the design, implementation and delivery of customer experiences. The company has a P/E ratio of 22.31 compared with the industry average of 34.73. Its earnings are expected to grow 51.8% this year. The stock has a Zacks Rank #1 and Growth Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.
Massachusetts-based Thermo Fisher Scientific Inc. (TMO - Free Report) is a provider of analytical instruments, equipment, reagents and consumables, software, and services for research, manufacturing, analysis, discovery, and diagnostics worldwide. It has a P/E ratio of 25.11 compared with the industry average of 57.24 and an expected earnings growth rate of 46.5% for this year. The stock has a Zacks Rank #2 and Growth Score of B.
Minnesota-based Best Buy Company Inc. (BBY - Free Report) is a multinational specialty retailer of consumer electronics, home office products, entertainment software, communication, food preparation, wellness, heath, security, appliances and related services. The company has a P/E ratio of 16.45 compared with the industry average of 17.03. Its earnings are expected to grow 18% this year. The stock has a Zacks Rank #2 and Growth Score of A.
Ohio-based ParkerHannifin Corporation (PH - Free Report) is a global diversified manufacturer of motion & control technologies and systems. The company has a P/E ratio of 22.41 compared with the industry average of 28.20 and an expected earnings growth rate of 9.6% for the fiscal year (ending Jun 2021). It has a Zacks Rank #2 and Growth Score of B.
Utah-based Nu Skin Enterprises Inc. (NUS - Free Report) develops and distributes a wide range of premium cosmetics, beauty, personal care and wellness products. The company has a P/E ratio of 15.03 compared with the industry average of 39.20. Its earnings are expected to grow 9.3% this year. It has a Zacks Rank #1 and Growth Score of A.
You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and test them first before taking the investment plunge.
The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
Click here to sign up for a free trial to the Research Wizard today.
Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance.