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Amid heightened volatility and uncertainty, dividend-paying securities are the major source of consistent income for investors to create wealth when returns from the equity market are at risk. In fact, stocks with a strong history of dividend growth year over year form a healthy portfolio with greater scope of capital appreciation as opposed to simple dividend offering stocks or those that have high yields.
Why Dividend Growth Investing Is Better?
Dividend growth stocks offer the best of both worlds –– potential for capital appreciation and rising income even in a volatile market. This is because these stocks belong to mature companies, which are less susceptible to large swings in the market, while simultaneously offer outsized payouts or sizable yields on a regular basis irrespective of the market direction.
Dividend growth reflects a sustainable business model, a long track of profitability, rising cash flows, good liquidity, a strong balance sheet and some value characteristics. All these superior fundamentals make dividend growth stocks quality and promising investments for the long term. Further, a history of strong dividend growth indicates that hike is likely in the future.
Though these stocks have a long history of outperformance compared with the broader stock market or any other dividend paying stock, it does not necessarily mean that they have the highest yields.
As a result, picking dividend growth stocks appear as winning strategies 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 one year.
Top Zacks Rank: Stocks having a Zacks Rank #1 (Strong Buy) and 2 (Buy) generally outperform their peers in all types of market environment.
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.
Here are five of the 11 stocks that fit the bill:
Pennsylvania-based Dick's Sporting Goods Inc. (DKS - Free Report) is a leading full-line sporting goods retailer in the United States. The company has a P/E ratio of 10.52 compared with the industry average of 11.27 and delivered earnings surprises in the past four quarters, with an average beat of 18.23%. It has a Zacks Rank #1 and Growth Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.
Washington-based Microsoft Corporation (MSFT - Free Report) is engaged in developing, licensing, and supporting software products, services and devices worldwide. Its earnings are expected to grow 13.14% for fiscal year (June 2019) while its P/E ratio stands at 24.38 compared with the industry average of 28.98. The stock has a Zacks Rank #2 and Growth Score of B.
Hawaii-based Matson Inc. (MATX - Free Report) operates as an ocean transportation and logistics company. It offers shipping services in Hawaii, Guam, and Micronesia islands and expedited service from China to southern California. The stock is expected to see earnings growth of 32.58% for this year and has a P/E ratio of 14.25 versus the industry average of 19.19. Matson has a Zacks Rank #1 and a Growth Score of B.
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. The company has a P/E ratio of 20.82 compared with the industry average of 31.67 and an expected earnings growth rate of 16.44% for this year. Thermo Fisher has a Zacks Rank #2 and a Growth Score of B.
Ohio-based The Progressive Corporation (PGR - Free Report) provides personal and commercial auto insurance, residential property insurance, and other specialty property-casualty insurance and related services primarily in the United States. The company has a P/E ratio of 14.20 compared with the industry average of 14.80 and its earnings are expected to grow 82.51% this year. It has a Zacks Rank #2 and a 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 Attractive Dividend Growth Stocks on Sale
Amid heightened volatility and uncertainty, dividend-paying securities are the major source of consistent income for investors to create wealth when returns from the equity market are at risk. In fact, stocks with a strong history of dividend growth year over year form a healthy portfolio with greater scope of capital appreciation as opposed to simple dividend offering stocks or those that have high yields.
Why Dividend Growth Investing Is Better?
Dividend growth stocks offer the best of both worlds –– potential for capital appreciation and rising income even in a volatile market. This is because these stocks belong to mature companies, which are less susceptible to large swings in the market, while simultaneously offer outsized payouts or sizable yields on a regular basis irrespective of the market direction.
Dividend growth reflects a sustainable business model, a long track of profitability, rising cash flows, good liquidity, a strong balance sheet and some value characteristics. All these superior fundamentals make dividend growth stocks quality and promising investments for the long term. Further, a history of strong dividend growth indicates that hike is likely in the future.
Though these stocks have a long history of outperformance compared with the broader stock market or any other dividend paying stock, it does not necessarily mean that they have the highest yields.
As a result, picking dividend growth stocks appear as winning strategies 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 one year.
Top Zacks Rank: Stocks having a Zacks Rank #1 (Strong Buy) and 2 (Buy) generally outperform their peers in all types of market environment.
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.
Here are five of the 11 stocks that fit the bill:
Pennsylvania-based Dick's Sporting Goods Inc. (DKS - Free Report) is a leading full-line sporting goods retailer in the United States. The company has a P/E ratio of 10.52 compared with the industry average of 11.27 and delivered earnings surprises in the past four quarters, with an average beat of 18.23%. It has a Zacks Rank #1 and Growth Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.
Washington-based Microsoft Corporation (MSFT - Free Report) is engaged in developing, licensing, and supporting software products, services and devices worldwide. Its earnings are expected to grow 13.14% for fiscal year (June 2019) while its P/E ratio stands at 24.38 compared with the industry average of 28.98. The stock has a Zacks Rank #2 and Growth Score of B.
Hawaii-based Matson Inc. (MATX - Free Report) operates as an ocean transportation and logistics company. It offers shipping services in Hawaii, Guam, and Micronesia islands and expedited service from China to southern California. The stock is expected to see earnings growth of 32.58% for this year and has a P/E ratio of 14.25 versus the industry average of 19.19. Matson has a Zacks Rank #1 and a Growth Score of B.
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. The company has a P/E ratio of 20.82 compared with the industry average of 31.67 and an expected earnings growth rate of 16.44% for this year. Thermo Fisher has a Zacks Rank #2 and a Growth Score of B.
Ohio-based The Progressive Corporation (PGR - Free Report) provides personal and commercial auto insurance, residential property insurance, and other specialty property-casualty insurance and related services primarily in the United States. The company has a P/E ratio of 14.20 compared with the industry average of 14.80 and its earnings are expected to grow 82.51% this year. It has a Zacks Rank #2 and a 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.