Back to top

Image: Bigstock

5 Top-Ranked Dividend Growth Stocks for 2022

Read MoreHide Full Article

As volatility and uncertainty continue to threaten the bull market going into the New Year, dividend investing seems to be a better bet. Though it does not offer dramatic price appreciation, the strategy is a major source of consistent income for investors to create wealth when returns from the equity market are at risk.

Stocks with a strong history of year-over-year dividend growth form a healthy portfolio with a greater scope of capital appreciation as opposed to simple dividend-paying stocks or those that have high yields. We have selected five dividend growth stocks — Boise Cascade L.L.C. (BCC - Free Report) , J.B. Hunt Transport Services (JBHT - Free Report) , Lowe's Companies (LOW - Free Report) , Broadcom Inc. (AVGO - Free Report) and Carriage Services (CSV - Free Report) — that could be compelling picks for your portfolio.

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.

Moreover, a history of dividend growth year over year leads to a healthy portfolio with a greater scope of capital appreciation than simple dividend-paying stocks or those with high yields. 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 environments.

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 16.

Here are five of the 16 stocks that fit the bill:

Idaho-based Boise Cascade operates as a wood products manufacturer and building materials distributor. It has seen solid earnings estimate revision of 13 cents for this year over the past month and has an estimated earnings growth rate of 159%.

Boise Cascade has a Zacks Rank #1 and Growth Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.

Arkansas-based J.B. Hunt Transport is a provider of a broad range of transportation services to a diverse group of customers through the United States, Canada and Mexico. JBHT has an estimated earnings growth rate of 44.5% for this year and delivered an average earnings surprise of 9.89% for the past four quarters.

J.B. Hunt has a Zacks Rank #2 and Growth Score of A.

North Carolina-based Lowe's has evolved as one of the world’s leading home improvement retailers offering services to homeowners, renters and commercial business customers. LOW saw solid earnings estimate revision of 54 cents over the past 30 days for the fiscal year (ending January 2022) and has an expected earnings growth rate of 34.4%.

Lowe’s has a Zacks Rank #2 and Growth Score of B.

California-based Broadcom is a premier designer, developer and global supplier of a broad range of semiconductor devices with a focus on complex digital and mixed-signal complementary metal oxide semiconductor based devices and analog III-V based products. The stock saw a solid earnings estimate revision of $2.01 for the fiscal year (ending October 2022) over the past 30 days and has an expected earnings growth rate of 17.9%.

Broadcom has a Zacks Rank #2 and Growth Score of B.

Texas-based Carriage Services is a leading provider of death care services and products in the United States. CSV delivered an average earnings surprise of 27.96% for the past four quarters and has an expected earnings growth rate of 64%.

Carriage Services carries a Zacks Rank #2 and has a Growth Score of B.

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.