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5 Stocks With Solid Dividend Growth for Steady Income

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The appeal for dividend investing has been on the rise given the surge in the Delta variant of COVID-19, which could derail global economic recovery. Though the strategy doesn’t offer dramatic price appreciation, it is a major source of consistent income for investors in any type of market.

While several dividend stocks could provide capital appreciation, honing in on stocks with a history of dividend growth leads to a healthy portfolio, with a greater scope of capital appreciation as opposed to simple dividend-paying stocks or those with high yields.

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.

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 25.

Here are five of the 25 stocks that fit the bill:

California-based Intuit Inc. (INTU - Free Report) is a business and financial software company that develops and sells financial, accounting and tax preparation software and related services for small businesses, consumers and accounting professionals globally. The company has an expected earnings growth rate of 19% for the fiscal year (ending Jul 2021) and delivered an earnings surprise of 49.74%, on average, 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 Deere & Company (DE - Free Report) is the world’s largest producer of agricultural equipment, manufacturing agricultural machinery since 1837 under the iconic John Deere brand with its signature green and yellow color scheme. The stock saw solid earnings estimate revision of 29 cents over the past 30 days for the fiscal year (ending October 2021) and has an estimated earnings growth rate of 106.9%. It carries a Zacks Rank #1 and has a Growth Score of B.

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 9 cents over the past 30 days for this year with a massive expected earnings growth rate of more than 100%. Boyd Gaming has a Zacks Rank #1 and Growth Score of A.

Indiana-based Anthem Inc. (ANTM - Free Report) is one of the largest publicly traded managed care organizations in terms of membership. The company saw solid earnings estimate of 6 cents over the past 30 days for this year and has an expected earnings growth rate of 12.3%. The stock has a Zacks Rank #2 and Growth Score of B.

Irvine-based Skyworks Solutions Inc. (SWKS - Free Report) designs, manufactures and markets a broad range of high-performance analog and mixed signal semiconductors that enable wireless connectivity. The company saw positive earnings estimate revision of a penny over the past 30 days for the fiscal year (ending September 2021) and has estimated earnings growth of 68.2%. The stock has a Zacks Rank #2 and Growth Score of B.

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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.