Amid the stock market volatility triggered by rising yields and tech sell-off, investors are looking for steady income along with some growth attributes. For them, picking stocks that not only pay out dividends but also increase them on a regular basis appears a winning strategy. These cash payouts are a major source of consistent income for investors when returns from the equity market are at risk.
Why Dividend Growth?
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. 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. 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. : 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. of B or better Growth Score Just these few criteria narrowed down the universe from over 7,700 stocks to just 28. Here are five of the 28 stocks that fit the bill: Florida-based Lennar Corporation ( is engaged in homebuilding and financial services in the United States. The company has seen solid earnings estimate revision of $1.61 over the past month for the fiscal year (ending November 2021) and has an expected earnings growth rate of 39.9%. Lennar sports a Zacks Rank #1 and has a Growth Score of B. You can see LEN Quick Quote LEN - Free Report) . the complete list of today’s Zacks #1 Rank stocks here Pennsylvania-based Vishay Intertechnology Inc. ( is a global manufacturer and supplier of discrete semiconductors and passive components. The company saw positive earnings estimate revision of a penny over the past 30 days for this year and has an estimated earnings growth rate of 88%. The stock has a Zacks Rank #1 and a Growth Score of B. VSH Quick Quote VSH - Free Report) Indiana-based Hillenbrand Inc ( is a global diversified industrial company with multiple market-leading brands that serve a wide variety of industries across the globe. The company has an estimated earnings growth rate of 8.8% for the fiscal year ending September 2021 and delivered a four-quarter earnings surprise of 45.99%, on average. The stock has a Zacks Rank #2 and a Growth Score of A. HI Quick Quote HI - Free Report) Colorado-based TeleTech Holdings Inc. ( is a customer experience, technology and services company that focuses on the design, implementation and delivery of customer experiences. The company saw solid earnings estimate revision of $1.11 over the past 30 days for this year and has an estimated earnings growth rate of 8.9%. The stock has a Zacks Rank #1 and a Growth Score of A. TTEC Quick Quote TTEC - Free Report) California-based Avery Dennison Corporation ( produces pressure-sensitive materials, and a variety of tickets, tags, labels and other converted products. The company saw positive earnings estimate revision of 3 cents over the past 30 days for this year and has an estimated earnings growth rate of 11.8%. The stock has a Zacks Rank #2 and a Growth Score of A. AVY Quick Quote AVY - Free Report) 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.
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