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With the return of volatility in the New Year, investors are eyeing both income and growth. This can easily be done through dividend stocks. Though these stocks do not offer dramatic price appreciation, they are a major source of consistent income for investors to create wealth when returns from the equity market are at risk.
In fact, stocks with a strong history of dividend growth year over year 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 — Arcos Dorados Holdings Inc. (ARCO - Free Report) , Cboe Global Markets (CBOE - Free Report) , Microsoft Corporation (MSFT - Free Report) , Parker-Hannifin Corporation (PH - Free Report) and PACCAR Inc. (PCAR - Free Report) — that could outperform the market in 2024.
Dividend Growth: A Winning Strategy
Stocks that have a strong history of dividend growth belong to mature companies 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 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 seven.
Here are five of the seven stocks that fit the bill:
Argentina-based Arcos Dorados operates as a franchisee of McDonald's, with its operations divided among Brazil, North Latin America, South Latin America and the Caribbean divisions. It also runs quick-service restaurants in Latin America and the Caribbean. Arcos Dorados delivered an average earnings surprise of 28.26% in the past last quarters and has an estimated earnings growth rate of 15.4% for this year.
Illinois-based Cboe Global is one of the largest stock exchange operators by volume in the United States and a leading global market for ETP trading. The company saw a positive earnings estimate revision of 6 cents over the past 30 days for this year. It has an estimated earnings growth rate of 5.9%.
Cboe Global 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 has an estimated earnings growth rate of 13.46% for the fiscal year ending June 2024 and delivered an average earnings surprise of 7.83% in the past four quarters.
Microsoft has a Zacks Rank #2 and a Growth Score of A.
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 positive earnings estimate revision of a penny over the past 30 days for the fiscal year ending June 2024 and has an estimated earnings growth rate of 7.6%.
ParkerHannifin has a Zacks Rank #2 and a Growth Score of B.
Washington-based PACCAR is a leading manufacturer of heavy-duty trucks in the world and has substantial manufacturing exposure to light/medium trucks. The company delivered an average earnings surprise of 15.99% for the past four quarters.
PACCAR has a Zacks Rank #2 and 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.
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.
Image: Bigstock
5 Unbeatable Dividend Growth Stocks for 2024
With the return of volatility in the New Year, investors are eyeing both income and growth. This can easily be done through dividend stocks. Though these stocks do not offer dramatic price appreciation, they are a major source of consistent income for investors to create wealth when returns from the equity market are at risk.
In fact, stocks with a strong history of dividend growth year over year 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 — Arcos Dorados Holdings Inc. (ARCO - Free Report) , Cboe Global Markets (CBOE - Free Report) , Microsoft Corporation (MSFT - Free Report) , Parker-Hannifin Corporation (PH - Free Report) and PACCAR Inc. (PCAR - Free Report) — that could outperform the market in 2024.
Dividend Growth: A Winning Strategy
Stocks that have a strong history of dividend growth belong to mature companies 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 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 seven.
Here are five of the seven stocks that fit the bill:
Argentina-based Arcos Dorados operates as a franchisee of McDonald's, with its operations divided among Brazil, North Latin America, South Latin America and the Caribbean divisions. It also runs quick-service restaurants in Latin America and the Caribbean. Arcos Dorados delivered an average earnings surprise of 28.26% in the past last quarters and has an estimated earnings growth rate of 15.4% for this year.
Arcos Dorados has a Zacks Rank #1 and a Growth Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.
Illinois-based Cboe Global is one of the largest stock exchange operators by volume in the United States and a leading global market for ETP trading. The company saw a positive earnings estimate revision of 6 cents over the past 30 days for this year. It has an estimated earnings growth rate of 5.9%.
Cboe Global 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 has an estimated earnings growth rate of 13.46% for the fiscal year ending June 2024 and delivered an average earnings surprise of 7.83% in the past four quarters.
Microsoft has a Zacks Rank #2 and a Growth Score of A.
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 positive earnings estimate revision of a penny over the past 30 days for the fiscal year ending June 2024 and has an estimated earnings growth rate of 7.6%.
ParkerHannifin has a Zacks Rank #2 and a Growth Score of B.
Washington-based PACCAR is a leading manufacturer of heavy-duty trucks in the world and has substantial manufacturing exposure to light/medium trucks. The company delivered an average earnings surprise of 15.99% for the past four quarters.
PACCAR has a Zacks Rank #2 and 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.