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5 Great Dividend Growth Stocks for Income and Safety
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In a near-zero interest environment and amid a series of drastic dividend cuts, investors are seeking consistent and safe income thereby driving 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.
In fact, investors are zeroing in on stocks that not only offer dividends but also consistently increase their payout. Stocks that have a strong history of dividend growth as opposed to those that offer high yields form a healthy portfolio with more scope for capital appreciation.
Dividend Growth 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.
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.
Just these few criteria narrowed down the universe from over 7,700 stocks to just six.
Here are five of the six stocks that fit the bill:
Taiwan-based Taiwan Semiconductor Manufacturing Company Ltd. (TSM - Free Report) is the world's largest dedicated integrated circuit foundry. It has seen upward earnings estimate revision of 5 cents over the past 30 days for this year and has an expected earnings growth rate of 30.2%. The stock has a Zacks Rank #1 and Growth Score of B. You can see the complete list of today’s Zacks #1 Rank stocks here.
Tennessee-based Dollar General Corporation (DG - Free Report) is a discount retailer providing various merchandise products across the United States. The company has an estimated earnings growth rate of 10.8% for fiscal year (ending January 2021) and delivered positive average earnings surprise of 5.87% in the past four quarters. The stock has a Zacks Rank #2 and Growth Score of A.
Ohio-based The Kroger Co. (KR - Free Report) operates as a retailer in the United States. The company operates supermarkets, multi-department stores, marketplace stores, and price impact warehouse stores. It has seen upward earnings estimate revision of 3 cents over the past 30 days for the fiscal year (ending January 2021) and has an expected earnings growth rate of 12.3%. Kroger has a Zacks Rank #2 and Growth Score of A.
New York-based-based Bristol-Myers Squibb Company (BMY - Free Report) is one of the leading global specialty biopharmaceutical companies focused on the development of treatments targeting serious diseases. It has seen upward earnings estimate revision of 4 cents over the past 30 days for this year and has an expected earnings growth rate of 30.9%. The stock has a Zacks Rank #2 and Growth Score of A.
Kansas-based NIC Inc. provides digital government services. It has an estimated earnings growth rate of 1.3% for this year and delivered average four-quarter positive earnings surprise of 6.8% on average. The stock has a Zacks Rank #2 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 Great Dividend Growth Stocks for Income and Safety
In a near-zero interest environment and amid a series of drastic dividend cuts, investors are seeking consistent and safe income thereby driving 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.
In fact, investors are zeroing in on stocks that not only offer dividends but also consistently increase their payout. Stocks that have a strong history of dividend growth as opposed to those that offer high yields form a healthy portfolio with more scope for capital appreciation.
Dividend Growth 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.
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.
Just these few criteria narrowed down the universe from over 7,700 stocks to just six.
Here are five of the six stocks that fit the bill:
Taiwan-based Taiwan Semiconductor Manufacturing Company Ltd. (TSM - Free Report) is the world's largest dedicated integrated circuit foundry. It has seen upward earnings estimate revision of 5 cents over the past 30 days for this year and has an expected earnings growth rate of 30.2%. The stock has a Zacks Rank #1 and Growth Score of B. You can see the complete list of today’s Zacks #1 Rank stocks here.
Tennessee-based Dollar General Corporation (DG - Free Report) is a discount retailer providing various merchandise products across the United States. The company has an estimated earnings growth rate of 10.8% for fiscal year (ending January 2021) and delivered positive average earnings surprise of 5.87% in the past four quarters. The stock has a Zacks Rank #2 and Growth Score of A.
Ohio-based The Kroger Co. (KR - Free Report) operates as a retailer in the United States. The company operates supermarkets, multi-department stores, marketplace stores, and price impact warehouse stores. It has seen upward earnings estimate revision of 3 cents over the past 30 days for the fiscal year (ending January 2021) and has an expected earnings growth rate of 12.3%. Kroger has a Zacks Rank #2 and Growth Score of A.
New York-based-based Bristol-Myers Squibb Company (BMY - Free Report) is one of the leading global specialty biopharmaceutical companies focused on the development of treatments targeting serious diseases. It has seen upward earnings estimate revision of 4 cents over the past 30 days for this year and has an expected earnings growth rate of 30.9%. The stock has a Zacks Rank #2 and Growth Score of A.
Kansas-based NIC Inc. provides digital government services. It has an estimated earnings growth rate of 1.3% for this year and delivered average four-quarter positive earnings surprise of 6.8% on average. The stock has a Zacks Rank #2 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.