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The return of volatility with the escalation of global growth concerns and the risk of recession in the United States has raised the appeal for dividend growth stocks. This is because dividend-paying securities are the major sources of consistent income when returns from the equity market are at risk.
While there are several dividend stocks that could provide capital appreciation, zeroing in on the stocks that not only pay dividends but also consistently increase the payout ratio could be some excellent choices.
Dividend Growth: A Winning Strategy
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.
Moreover, a history of dividend growth year over year leads to a healthy portfolio with a greater scope of capital appreciation as opposed to simple dividend paying stocks or those with high yields. 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 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.
Here are six of the 13 stocks that fit the bill:
Oregon-based Columbia Sportswear Company (COLM - Free Report) is a global leader in design, sourcing, marketing and distribution of active outdoor apparel and footwear with operations in North America, Europe and Asia. It has seen a positive earnings estimate revision of four cents for this year over the past month and delivered average positive surprise of 83.45% in the last four quarters. The stock sports a Zacks Rank #1 and a Growth Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.
California-based Robert Half International Inc. (RHI - Free Report) is the world's first and the largest specialized staffing firm. It has pulled off average earnings surprise of 5.78% in the last four quarters and expects its earnings to grow 13.02% for the current year. The stock has a Zacks Rank 1 and a Growth Score of A.
Lowa-based Caseys General Stores Inc. (CASY - Free Report) operates convenience stores under the Casey's and Casey's General Store names. The company saw a solid earnings estimate revision of 14 cents over the past 30 days for the fiscal year (ending April 2019) and has an expected earnings growth rate of 35.96%. It has a Zacks Rank #2 and a Growth Score of A.
Illinois-based Abbott Laboratories (ABT - Free Report) discovers, develops, manufactures and sells health care products worldwide. It has an estimated earnings growth rate of 11.11% for the ongoing year and delivered average beat of 1.47% in the last four quarters. The stock has a Zacks Rank of2 and a Growth Score of B.
Massachusetts-based LPL Financial Holdings Inc. (LPLA - Free Report) is engaged in providing an integrated platform of brokerage and investment advisory services to independent financial advisors and financial advisors at financial institutions in the United States. The stock has delivered average positive surprise of 17.06% in the trailing four quarters and has an expected earnings growth rate of 21.20%. The stock is a Zacks #1 Ranked player and has a Growth Score of A.
Connecticut-based SS&C Technologies Holdings Inc. (SSNC - Free Report) delivers investment and financial management software and related services, focused exclusively on the financial services industry. It has an estimated earnings growth rate of 30.48% for 2019 and came up with average beat of 5.98% for the previous four quarters. SS&C Technologies is a #1 Ranked player and has 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.
Image: Bigstock
6 Excellent Dividend Growth Stocks to Buy Now
The return of volatility with the escalation of global growth concerns and the risk of recession in the United States has raised the appeal for dividend growth stocks. This is because dividend-paying securities are the major sources of consistent income when returns from the equity market are at risk.
While there are several dividend stocks that could provide capital appreciation, zeroing in on the stocks that not only pay dividends but also consistently increase the payout ratio could be some excellent choices.
Dividend Growth: A Winning Strategy
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.
Moreover, a history of dividend growth year over year leads to a healthy portfolio with a greater scope of capital appreciation as opposed to simple dividend paying stocks or those with high yields. 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 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.
Here are six of the 13 stocks that fit the bill:
Oregon-based Columbia Sportswear Company (COLM - Free Report) is a global leader in design, sourcing, marketing and distribution of active outdoor apparel and footwear with operations in North America, Europe and Asia. It has seen a positive earnings estimate revision of four cents for this year over the past month and delivered average positive surprise of 83.45% in the last four quarters. The stock sports a Zacks Rank #1 and a Growth Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.
California-based Robert Half International Inc. (RHI - Free Report) is the world's first and the largest specialized staffing firm. It has pulled off average earnings surprise of 5.78% in the last four quarters and expects its earnings to grow 13.02% for the current year. The stock has a Zacks Rank 1 and a Growth Score of A.
Lowa-based Caseys General Stores Inc. (CASY - Free Report) operates convenience stores under the Casey's and Casey's General Store names. The company saw a solid earnings estimate revision of 14 cents over the past 30 days for the fiscal year (ending April 2019) and has an expected earnings growth rate of 35.96%. It has a Zacks Rank #2 and a Growth Score of A.
Illinois-based Abbott Laboratories (ABT - Free Report) discovers, develops, manufactures and sells health care products worldwide. It has an estimated earnings growth rate of 11.11% for the ongoing year and delivered average beat of 1.47% in the last four quarters. The stock has a Zacks Rank of2 and a Growth Score of B.
Massachusetts-based LPL Financial Holdings Inc. (LPLA - Free Report) is engaged in providing an integrated platform of brokerage and investment advisory services to independent financial advisors and financial advisors at financial institutions in the United States. The stock has delivered average positive surprise of 17.06% in the trailing four quarters and has an expected earnings growth rate of 21.20%. The stock is a Zacks #1 Ranked player and has a Growth Score of A.
Connecticut-based SS&C Technologies Holdings Inc. (SSNC - Free Report) delivers investment and financial management software and related services, focused exclusively on the financial services industry. It has an estimated earnings growth rate of 30.48% for 2019 and came up with average beat of 5.98% for the previous four quarters. SS&C Technologies is a #1 Ranked player and has 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.