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Dividend investing remains a popular choice among investors, irrespective of market conditions. This strategy focuses on companies that not only pay dividends but also consistently increase them over time. This approach offers a unique blend of income and growth potential, appealing to a broad range of investors, from those seeking steady income to those aiming for long-term capital appreciation. Additionally, it can provide a sense of security in times of market uncertainty or downturns.
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 — Cboe Global Markets (CBOE - Free Report) , Parker-Hannifin Corporation (PH - Free Report) , Microsoft Corporation (MSFT - Free Report) , FedEx Corporation (FDX - Free Report) and Cardinal Health Inc. (CAH - Free Report) — that could be solid choices for your portfolio.
Why Dividend Growth 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 a 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 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 12.
Here are five of the 12 stocks that fit the bill:
Illinois-based Cboe Global is one of the largest stock exchange operators by volume in the United States and a leading market globally for ETP trading. The company saw a positive earnings estimate revision of 3 cents over the past seven days for this year. It delivered an average earnings surprise of 4.07% for the past four quarters.
Ohio-based Parker-Hannifin is a global diversified manufacturer of motion & control technologies and systems. It provides precision-engineered solutions for a wide variety of mobile, industrial and aerospace markets. The stock saw a solid earnings estimate revision of a couple of cents over the past seven days for the fiscal year ending June 2024 and has an estimated earnings growth rate of 5.3%.
Parker-Hannifin has a Zacks Rank #2 and a Growth Score of B.
Washington-based Microsoft is one of the largest broad-based technology providers in the world. The company dominates the PC software market, with more than 73% of the market share for desktop operating systems. Microsoft saw a positive earnings estimate revision of a couple of cents for the fiscal year (ending June 2024) over the past seven days. It has an estimated earnings growth rate of 13.46%
Microsoft has a Zacks Rank #2 and a Growth Score of A.
Tennessee-based FedEx is the leader in global express delivery services. It provides a broad portfolio of transportation, e-commerce and business services through companies competing collectively, operating independently and managing collaboratively under the FedEx brand. FedEx has an estimated earnings growth rate of 21.26% for the fiscal year (ending May 2024) and delivered an average earnings surprise of 16.94% for the past four quarters.
FDX has a Zacks Rank #2 and a Growth Score of B.
Ohio-based Cardinal Health is a nationwide drug distributor and provider of services to pharmacies, healthcare providers and manufacturers. The company saw a positive earnings estimate revision of 4 cents over the past seven days for the fiscal year (ending June 2024), with an expected earnings growth rate of 17.79%.
Cardinal Health has a Zacks Rank #2 and a Growth Score of A.
You can get the remaining stock 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 Top Dividend Growth Stocks for Your Portfolio
Dividend investing remains a popular choice among investors, irrespective of market conditions. This strategy focuses on companies that not only pay dividends but also consistently increase them over time. This approach offers a unique blend of income and growth potential, appealing to a broad range of investors, from those seeking steady income to those aiming for long-term capital appreciation. Additionally, it can provide a sense of security in times of market uncertainty or downturns.
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 — Cboe Global Markets (CBOE - Free Report) , Parker-Hannifin Corporation (PH - Free Report) , Microsoft Corporation (MSFT - Free Report) , FedEx Corporation (FDX - Free Report) and Cardinal Health Inc. (CAH - Free Report) — that could be solid choices for your portfolio.
Why Dividend Growth 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 a 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 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 12.
Here are five of the 12 stocks that fit the bill:
Illinois-based Cboe Global is one of the largest stock exchange operators by volume in the United States and a leading market globally for ETP trading. The company saw a positive earnings estimate revision of 3 cents over the past seven days for this year. It delivered an average earnings surprise of 4.07% for the past four quarters.
Cboe Global has a Zacks Rank #1 and a Growth Score of B. You can see the complete list of today’s Zacks #1 Rank stocks here.
Ohio-based Parker-Hannifin is a global diversified manufacturer of motion & control technologies and systems. It provides precision-engineered solutions for a wide variety of mobile, industrial and aerospace markets. The stock saw a solid earnings estimate revision of a couple of cents over the past seven days for the fiscal year ending June 2024 and has an estimated earnings growth rate of 5.3%.
Parker-Hannifin has a Zacks Rank #2 and a Growth Score of B.
Washington-based Microsoft is one of the largest broad-based technology providers in the world. The company dominates the PC software market, with more than 73% of the market share for desktop operating systems. Microsoft saw a positive earnings estimate revision of a couple of cents for the fiscal year (ending June 2024) over the past seven days. It has an estimated earnings growth rate of 13.46%
Microsoft has a Zacks Rank #2 and a Growth Score of A.
Tennessee-based FedEx is the leader in global express delivery services. It provides a broad portfolio of transportation, e-commerce and business services through companies competing collectively, operating independently and managing collaboratively under the FedEx brand. FedEx has an estimated earnings growth rate of 21.26% for the fiscal year (ending May 2024) and delivered an average earnings surprise of 16.94% for the past four quarters.
FDX has a Zacks Rank #2 and a Growth Score of B.
Ohio-based Cardinal Health is a nationwide drug distributor and provider of services to pharmacies, healthcare providers and manufacturers. The company saw a positive earnings estimate revision of 4 cents over the past seven days for the fiscal year (ending June 2024), with an expected earnings growth rate of 17.79%.
Cardinal Health has a Zacks Rank #2 and a Growth Score of A.
You can get the remaining stock 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..