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6 Top-Ranked Dividend Growth Stocks to Beat the May Swoon
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With the start of May, investors might have turned cautious given the long history of weak performance during the summer months (May to October) per the old adage — “Sell in May and Go Away.” Amid such a scenario, dividend investing seems to be the best practice.
This is because dividends are a major source of consistent income for investors in any type of market though it does not offer dramatic price appreciation. While there are several dividend stocks that could provide capital appreciation, zeroing in on those with a history of dividend growth should lead to a healthy portfolio, with greater scope for capital appreciation as opposed to simple dividend-paying stocks or those with high yields.
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 hike 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 appears as a winning strategy 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 revenues.
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 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 30.
Here are six of the 30 stocks that fit the bill:
California-based Apple Inc. (AAPL - Free Report) designs, manufactures and markets smartphones, personal computers, tablets, wearables and accessories worldwide. The company has seen solid earnings estimate revision of 44 cents over the past month for the fiscal year (ending September 2021) and has delivered an average earnings surprise of 23% in the past four quarters. 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.
Illinois-based Caterpillar Inc. (CAT - Free Report) manufactures and sells construction and mining equipment, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives worldwide. The company saw positive earnings estimate revision of 24 cents over the past 30 days for this year with an expected earnings growth rate of 26.68%. Caterpillar has a Zacks Rank #1 and Growth Score of B.
Michigan-based Penske Automotive Group Inc. (PAG - Free Report) is engaged in the operation of automotive and commercial truck dealerships in the United States, Canada and Western Europe. The company saw positive earnings estimate revision of 34 cents over the past 30 days for this year and has an expected earnings growth rate of 17.77%. It has a Zacks Rank #1 and Growth Score of A.
Las Vegas-based Boyd Gaming Corporation (BYD - Free Report) is a multi-jurisdictional gaming company. It owns and operates gaming entertainment properties in Nevada, Illinois, Indiana, Iowa, Kansas, Louisiana, Mississippi, Missouri, Ohio and Pennsylvania. The company saw positive earnings estimate revision of $1.17 over the past 30 days for this year with an expected earnings growth expectation of more than 100%. Boyd Gaming has a Zacks Rank #1 and Growth Score of B.
Texas-based Santander Consumer USA Holdings Inc. is a technology-driven consumer finance company focused on vehicle finance and unsecured consumer lending products. The company has seen solid earnings estimate revision of $2.15 over the past month for this year and has an expected earnings growth of 88.5%. The stock has a Zacks Rank #1 and Growth Score of A.
Idaho-based Boise Cascade L.L.C. (BCC - Free Report) operates as a wood products manufacturer and building materials distributor. It has seen solid earnings estimate revision of $2.36 for this year over the past month, and has an estimated earnings growth rate of 21.37%. The stock has a Zacks Rank #1 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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6 Top-Ranked Dividend Growth Stocks to Beat the May Swoon
With the start of May, investors might have turned cautious given the long history of weak performance during the summer months (May to October) per the old adage — “Sell in May and Go Away.” Amid such a scenario, dividend investing seems to be the best practice.
This is because dividends are a major source of consistent income for investors in any type of market though it does not offer dramatic price appreciation. While there are several dividend stocks that could provide capital appreciation, zeroing in on those with a history of dividend growth should lead to a healthy portfolio, with greater scope for capital appreciation as opposed to simple dividend-paying stocks or those with high yields.
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 hike 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 appears as a winning strategy 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 revenues.
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 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 30.
Here are six of the 30 stocks that fit the bill:
California-based Apple Inc. (AAPL - Free Report) designs, manufactures and markets smartphones, personal computers, tablets, wearables and accessories worldwide. The company has seen solid earnings estimate revision of 44 cents over the past month for the fiscal year (ending September 2021) and has delivered an average earnings surprise of 23% in the past four quarters. 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.
Illinois-based Caterpillar Inc. (CAT - Free Report) manufactures and sells construction and mining equipment, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives worldwide. The company saw positive earnings estimate revision of 24 cents over the past 30 days for this year with an expected earnings growth rate of 26.68%. Caterpillar has a Zacks Rank #1 and Growth Score of B.
Michigan-based Penske Automotive Group Inc. (PAG - Free Report) is engaged in the operation of automotive and commercial truck dealerships in the United States, Canada and Western Europe. The company saw positive earnings estimate revision of 34 cents over the past 30 days for this year and has an expected earnings growth rate of 17.77%. It has a Zacks Rank #1 and Growth Score of A.
Las Vegas-based Boyd Gaming Corporation (BYD - Free Report) is a multi-jurisdictional gaming company. It owns and operates gaming entertainment properties in Nevada, Illinois, Indiana, Iowa, Kansas, Louisiana, Mississippi, Missouri, Ohio and Pennsylvania. The company saw positive earnings estimate revision of $1.17 over the past 30 days for this year with an expected earnings growth expectation of more than 100%. Boyd Gaming has a Zacks Rank #1 and Growth Score of B.
Texas-based Santander Consumer USA Holdings Inc. is a technology-driven consumer finance company focused on vehicle finance and unsecured consumer lending products. The company has seen solid earnings estimate revision of $2.15 over the past month for this year and has an expected earnings growth of 88.5%. The stock has a Zacks Rank #1 and Growth Score of A.
Idaho-based Boise Cascade L.L.C. (BCC - Free Report) operates as a wood products manufacturer and building materials distributor. It has seen solid earnings estimate revision of $2.36 for this year over the past month, and has an estimated earnings growth rate of 21.37%. The stock has a Zacks Rank #1 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..