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5 Dividend Growth Stocks to Buy Amid Market Volatility
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After a strong comeback from last year’s steep losses, the U.S. stocks lost momentum lately on uncertain Fed rate hike plans and recession fears. This has raised the appeal of dividend investing once again. Dividend stocks are major sources of consistent income for investors to create wealth when returns from the equity market are at risk even though these do not offer dramatic price appreciation.
In fact, 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 — Microchip Technology Incorporated (MCHP - Free Report) , Caterpillar Inc. (CAT - Free Report) , Xcel Energy Inc. (XEL - Free Report) , Cardinal Health Inc. (CAH - Free Report) and Archer-Daniels-Midland Company (ADM - Free Report) — that could be compelling picks amid market volatility.
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 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 32.
Here are five of the 32 stocks that fit the bill:
Arizona-based Microchip Technology is engaged in developing and manufacturing of microcontrollers, memory and analog and interface products for embedded control systems, which are small, low-power computers designed to perform specific tasks. The company has seen a positive earnings estimate revision of 7 cents for the fiscal year (ending March 2023) over the past month and has an expected earnings growth rate of 29.9%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Microchip Technology has a Zacks Rank #1 and a Growth Score of A.
Illinois-based Caterpillar is the largest global construction and mining equipment manufacturer. The company saw a positive earnings estimate revision of 32 cents over the past 30 days for this year, with an expected earnings growth rate of 12.8%.
Caterpillar has a Zacks Rank #2 and Growth Score of A.
Minnesota-based Xcel Energy is a holding company with subsidiaries engaged primarily in the utility business. The company saw a positive earnings estimate revision of a penny over the past 30 days for this year, with an expected earnings growth rate of 6.31%.
Xcel Energy has a Zacks Rank #2 and a Growth Score of B.
Ohio-based Cardinal Health is a nation-wide drug distributor and provider of services to pharmacies, healthcare providers and manufacturers. The company saw a positive earnings estimate revision of 12 cents over the past 30 days for the fiscal year (ending June 2023) with an expected earnings growth rate of 6.7%.
Cardinal Health has a Zacks Rank #2 and a Growth Score of A.
Illinois-based Archer-Daniels is one of the leading producers of food and beverage ingredients as well as goods made from various agricultural products. ADM saw a solid earnings estimate revision of 36 cents over the past 30 days for this year and delivered an average trailing four-quarter earnings surprise of 28.07%.
Archer-Daniels has a Zacks Rank #1 and a 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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5 Dividend Growth Stocks to Buy Amid Market Volatility
After a strong comeback from last year’s steep losses, the U.S. stocks lost momentum lately on uncertain Fed rate hike plans and recession fears. This has raised the appeal of dividend investing once again. Dividend stocks are major sources of consistent income for investors to create wealth when returns from the equity market are at risk even though these do not offer dramatic price appreciation.
In fact, 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 — Microchip Technology Incorporated (MCHP - Free Report) , Caterpillar Inc. (CAT - Free Report) , Xcel Energy Inc. (XEL - Free Report) , Cardinal Health Inc. (CAH - Free Report) and Archer-Daniels-Midland Company (ADM - Free Report) — that could be compelling picks amid market volatility.
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 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 32.
Here are five of the 32 stocks that fit the bill:
Arizona-based Microchip Technology is engaged in developing and manufacturing of microcontrollers, memory and analog and interface products for embedded control systems, which are small, low-power computers designed to perform specific tasks. The company has seen a positive earnings estimate revision of 7 cents for the fiscal year (ending March 2023) over the past month and has an expected earnings growth rate of 29.9%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Microchip Technology has a Zacks Rank #1 and a Growth Score of A.
Illinois-based Caterpillar is the largest global construction and mining equipment manufacturer. The company saw a positive earnings estimate revision of 32 cents over the past 30 days for this year, with an expected earnings growth rate of 12.8%.
Caterpillar has a Zacks Rank #2 and Growth Score of A.
Minnesota-based Xcel Energy is a holding company with subsidiaries engaged primarily in the utility business. The company saw a positive earnings estimate revision of a penny over the past 30 days for this year, with an expected earnings growth rate of 6.31%.
Xcel Energy has a Zacks Rank #2 and a Growth Score of B.
Ohio-based Cardinal Health is a nation-wide drug distributor and provider of services to pharmacies, healthcare providers and manufacturers. The company saw a positive earnings estimate revision of 12 cents over the past 30 days for the fiscal year (ending June 2023) with an expected earnings growth rate of 6.7%.
Cardinal Health has a Zacks Rank #2 and a Growth Score of A.
Illinois-based Archer-Daniels is one of the leading producers of food and beverage ingredients as well as goods made from various agricultural products. ADM saw a solid earnings estimate revision of 36 cents over the past 30 days for this year and delivered an average trailing four-quarter earnings surprise of 28.07%.
Archer-Daniels has a Zacks Rank #1 and a 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.