How to Find Stocks Poised to Grow Dividends Now

Eric Dutram Published on November 30, 2016

NKE SBUX TSN SDY VIG NOBL DIVY DFND LEAD

Dividend investing is always one of the most popular areas in the stock market world. But the term ‘dividend investing’ covers a pretty wide range of topics, and it can mean a lot of different things to various investors.

In an effort to find the best dividend stocks though, many investors zero-in on high dividend payers for exposure. However, for many investors, this might not be the best approach, as a look to dividend growth could be optimal instead. That is because companies in this market segment are often more disciplined than their high yield peers and can offer outperformance as well.

To help investors navigate this market segment, I spoke with Eric Ervin, the CEO of Reality Shares to get some insights in the latest edition of the Dutram Report. Ervin’s company has a series of funds that utilize their ‘DIVCON’ system which seeks to find S&P 500 companies that are most likely to increase their dividends within the next year.

This technique is the basis for several of the company’s funds—including LEAD, DFND, and GARD—and it focuses on a number of quantitative factors to find the stocks most likely to increase dividends. This includes free cash flows, buybacks, recent dividend actions, as well as other fundamental factors. Some key examples of recent companies that meet these criteria include Nike (NKE - Free Report) , Tyson (TSN - Free Report) , and Starbucks (SBUX - Free Report) , to name a few.

This approach is in contrast to the world of ‘dividend aristocrat’ ETFs which includes funds such as SDY, VIG and NOBL. These funds just focus on companies that have consistently raised dividends in the past, while the DIVCON approach offers up more of a forward-looking take, a twist that could be of interest to some investors out there.

Lastly, we also discuss the company’s DIVS ETF (DIVY - Free Report) . This unique product seeks ‘exposure to the growth rate of expected dividends’ and can be thought of as a play on the dividend swap market. This is a pretty novel approach, and we detail in the podcast why this technique might make for an excellent dividend play for some investors.

This was certainly an informative podcast, and a must-listen for investors focused on the dividend market, so make sure to listen to this edition of the Dutram Report for a guide to this underappreciated market segment. And for more news and insights into the world of ETFs, make sure to be on the lookout for the next edition of the Dutram Report, and check out the many other great Zacks podcasts as well!

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