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. Additionally, it can provide a sense of security in times of market uncertainty or downturns, as dividend-paying stocks can reduce the volatility of a portfolio and tend to outperform in a choppy market.
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 Quick Quote CBOE - Free Report) , Cardinal Health Inc. ( CAH Quick Quote CAH - Free Report) , Assurant Inc. ( AIZ Quick Quote AIZ - Free Report) , Installed Building Products, Inc. ( IBP Quick Quote IBP - Free Report) and FedEx Corporation ( FDX Quick Quote FDX - Free Report) — that could be solid choices for your portfolio. Dividend Growth: A Winning 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 increases 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 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 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 has 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 nine. Here are five of the nine 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 21 cents over the past 30 days for this year. It has delivered an average earnings surprise of 4.07% for the past four quarters. Cboe Global currently sports a Zacks Rank #1 and has a Growth Score of B. You can see . the complete list of today’s Zacks #1 Rank stocks here 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 23 cents over the past 30 days for the fiscal year (ending June 2024), with an expected earnings growth rate of 19%. Cardinal Health presently has a Zacks Rank #2 and a Growth Score of A. New York-based Assurant is a global provider of risk management solutions in the housing and lifestyle markets, protecting where people live and the goods they buy. The company operates in North America, Latin America, Europe and the Asia Pacific. The stock has seen a solid earnings estimate revision of $1.99 over the past 30 days for this year and has an estimated earnings growth rate of 30.8%. Assurant currently flaunts a Zacks Rank #1 and has a Growth Score of B. Ohio-based Installed Building Products operates as a residential insulation installer in the United States. The company also installs complementary building products, including garage doors, rain gutters, shower doors, closet shelving and mirrors. Installed Building Products saw a positive earnings estimate revision of 28 cents for this year over the past 30 days. It has an estimated earnings growth rate of 11.7% Installed Building Products has a Zacks Rank #2 and a Growth Score of A at present. 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 has delivered an average earnings surprise of 16.94% for the past four quarters. FDX currently has a Zacks Rank #2 and a Growth Score of B. 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.
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. 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