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5 Dividend Growth Stocks to Excel in Any Market Condition
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With uncertainty ruling the markets since the beginning of the year, it’s not surprising that dividend investing has emerged as one of the most popular investing themes. Dividends are always the major sources of consistent income for investors when returns from price movements of stocks are at risk.
In fact, stocks that have a strong history of dividend growth as opposed to those that have high yields form a healthy portfolio.
Why Choose Dividend Growth
Stocks with dividend growth generally belong to companies that outperform their peers and generate increased profits year after year. Thus, the dividend growth strategy has an edge over the steady dividend strategy in terms of increased year-over-year income. By investing in stocks with dividend growth investors can enjoy rising current income while waiting for capital appreciation.
Moreover, these stocks often have superior fundamentals compared to other dividend paying stocks as dividend growth speaks of a sustainable business model, a long track record of profitability, rising cash flows, good liquidity, a strong balance sheet and some value characteristics. All these make dividend growth a promising investment, particularly amid market turbulence.
Further, these are proven outperformers over the long term despite the fact that they do not necessarily have the highest yields.
Here are the screening parameters that could result in a winning dividend growth portfolio:
5-Year Historical Dividend Growth greater than zero: This selects stocks with a solid dividend growth history.
Most Recent Payout Ratio less than M-Industry: This is the measure of dividend payments as a percentage of earnings. A relatively low payout ratio indicates the company’s ability to increase dividend in the future even in tough times.
5-Year Historical Sales Growth greater than zero: This selects stocks with a strong record of revenue growth.
5-Year Historical EPS Growth greater than zero: This shortlists 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.
52-Week Price Change greater than S&P 500 (Median): This ensures that the stock appreciated more than the S&P 500 over the past one year.
Zacks Rank Less than 2: Stocks having a Zacks Rank #1 (Strong Buy) or 2 (Buy) generally perform better than their peers in all types of market environment.
VGM Style Score of B or better: This is simply a weighted combination of Value, Growth and Momentum.
Market Capitalization greater than $2 billion: We have eliminated small-cap stocks to ensure better flexibility and tradability.
Here are 5 of the 11 stocks that fit the bill:
Retail giant Wal-Mart Stores Inc. (WMT - Free Report) operates more than 11,500 retail units under 63 different banners in 28 countries and e-commerce websites in 11 countries. It saw a positive earnings estimate revision of 13 cents for fiscal 2017 over the past 60 days. The stock has a Zacks Rank #2 and a VGM Style Score of A.
The Home Depot, Inc. (HD - Free Report) is the world's largest home improvement specialty retailer. This Zacks Rank #2 company has an average four-quarter EPS surprise of 4.2% and a VGM Style Score of A.
Amgen Inc. (AMGN - Free Report) is one of the leading biotechnology companies in the world, with extensive manufacturing, distribution and sales facilities. Its earnings are expected to grow at a rate of 7.5% this year. The stock has a Zacks Rank #2 and a VGM Style Score of B.
United Parcel Service, Inc. (UPS - Free Report) is a global leader in logistics, offering a broad range of solutions including transporting packages and freight, facilitating international trade, and deploying advanced technology to more efficiently manage the world of business. The stock has delivered a positive average earnings surprise of 6.0% over the past four quarters. It has a Zacks Rank #2 and a VGM Style Score of B.
Intel Corporation (INTC - Free Report) is one of the world’s leading producers of semiconductor components and digital platforms. Its earnings are expected to growth at a rate of 8.1% for the next 5 years. The stock has a Zacks Rank #2 and a VGM Style 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.
Zacks Restaurant Recommendations: In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »
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5 Dividend Growth Stocks to Excel in Any Market Condition
With uncertainty ruling the markets since the beginning of the year, it’s not surprising that dividend investing has emerged as one of the most popular investing themes. Dividends are always the major sources of consistent income for investors when returns from price movements of stocks are at risk.
In fact, stocks that have a strong history of dividend growth as opposed to those that have high yields form a healthy portfolio.
Why Choose Dividend Growth
Stocks with dividend growth generally belong to companies that outperform their peers and generate increased profits year after year. Thus, the dividend growth strategy has an edge over the steady dividend strategy in terms of increased year-over-year income. By investing in stocks with dividend growth investors can enjoy rising current income while waiting for capital appreciation.
Moreover, these stocks often have superior fundamentals compared to other dividend paying stocks as dividend growth speaks of a sustainable business model, a long track record of profitability, rising cash flows, good liquidity, a strong balance sheet and some value characteristics. All these make dividend growth a promising investment, particularly amid market turbulence.
Further, these are proven outperformers over the long term despite the fact that they do not necessarily have the highest yields.
Here are the screening parameters that could result in a winning dividend growth portfolio:
5-Year Historical Dividend Growth greater than zero: This selects stocks with a solid dividend growth history.
Most Recent Payout Ratio less than M-Industry: This is the measure of dividend payments as a percentage of earnings. A relatively low payout ratio indicates the company’s ability to increase dividend in the future even in tough times.
5-Year Historical Sales Growth greater than zero: This selects stocks with a strong record of revenue growth.
5-Year Historical EPS Growth greater than zero: This shortlists 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.
52-Week Price Change greater than S&P 500 (Median): This ensures that the stock appreciated more than the S&P 500 over the past one year.
Zacks Rank Less than 2: Stocks having a Zacks Rank #1 (Strong Buy) or 2 (Buy) generally perform better than their peers in all types of market environment.
VGM Style Score of B or better: This is simply a weighted combination of Value, Growth and Momentum.
Market Capitalization greater than $2 billion: We have eliminated small-cap stocks to ensure better flexibility and tradability.
Here are 5 of the 11 stocks that fit the bill:
Retail giant Wal-Mart Stores Inc. (WMT - Free Report) operates more than 11,500 retail units under 63 different banners in 28 countries and e-commerce websites in 11 countries. It saw a positive earnings estimate revision of 13 cents for fiscal 2017 over the past 60 days. The stock has a Zacks Rank #2 and a VGM Style Score of A.
The Home Depot, Inc. (HD - Free Report) is the world's largest home improvement specialty retailer. This Zacks Rank #2 company has an average four-quarter EPS surprise of 4.2% and a VGM Style Score of A.
Amgen Inc. (AMGN - Free Report) is one of the leading biotechnology companies in the world, with extensive manufacturing, distribution and sales facilities. Its earnings are expected to grow at a rate of 7.5% this year. The stock has a Zacks Rank #2 and a VGM Style Score of B.
United Parcel Service, Inc. (UPS - Free Report) is a global leader in logistics, offering a broad range of solutions including transporting packages and freight, facilitating international trade, and deploying advanced technology to more efficiently manage the world of business. The stock has delivered a positive average earnings surprise of 6.0% over the past four quarters. It has a Zacks Rank #2 and a VGM Style Score of B.
Intel Corporation (INTC - Free Report) is one of the world’s leading producers of semiconductor components and digital platforms. Its earnings are expected to growth at a rate of 8.1% for the next 5 years. The stock has a Zacks Rank #2 and a VGM Style 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.
Zacks Restaurant Recommendations: In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »