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5 Dividend Growth Stocks to Buy Now for Assured Returns

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Amid the rising cases of the Delta variant of COVID-19, investors are seeking consistent and safe income, thereby driving the appeal for dividend investing. This is because investors can enjoy rising current income while anticipating capital appreciation irrespective of market conditions.

While there are several dividend stocks, honing in on those 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 19.

Here are five of the 19 stocks that fit the bill:

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 solid earnings estimate revision of $3.57 over the past 30 days for this year and has an expected earnings growth rate of 87.6%. It has a Zacks Rank #1 and Growth Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.

Texas-based Nexstar Media Group Inc. (NXST - Free Report) operates as a television broadcasting and digital media company in the United States. It focuses on the acquisition, development and operation of television stations and interactive community websites in medium-sized markets. The company delivered an average positive earnings surprise of 37.58% for the past four quarters. The stock has a Zacks Rank #2 and Growth Score of B.

California-based Avery Dennison Corporation (AVY - Free Report) produces pressure-sensitive materials, and a variety of tickets, tags, labels and other converted products. The company saw positive earnings estimate revision of 18 cents over the past 30 days for this year and has an estimated earnings growth rate of 25.9%. It currently has a Zacks Rank #2 and Growth Score of A.

Texas-based Texas Instruments Incorporated (TXN - Free Report) is an original equipment manufacturer of analog, mixed signal and digital signal processing integrated circuits. The company has seen upward earnings estimate revision of 48 cents over the past 30 days for this year and has estimated earnings growth of 31.7%. It carries a Zacks Rank #2 and has a Growth Score of B.

Texas-based Carriage Services (CSV - Free Report) is a leading provider of death care services and products in the United States. The company has seen robust earnings estimate revision of 19 cents over the past 30 days for this year. It has an expected earnings growth rate of 43%. Carriage Services carries a Zacks Rank #2 and has a 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.