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5 Dividend Growth Stocks to Buy in Historically Weak September

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Wall Street is off to a poor start in September on renewed concerns about the health of the economy and the stock market's historical performance. Amid such a backdrop, investors are increasingly exploring strategies that will help them to protect their portfolios from downside risk. And nothing seems better than the strategy of dividend investing. 

Picking stocks with a history of dividend growth leads to a healthy portfolio with a greater scope of capital appreciation as opposed to simple dividend-paying stocks or those with high yields. We have selected five dividend growth stocks — Vertiv Holdings Co. (VRT - Free Report) , Charles River Associates (CRAI - Free Report) , Cabot Corporation (CBT - Free Report) , Leidos Holdings Inc. (LDOS - Free Report) and HCA Healthcare Inc. (HCA - Free Report) — that could be solid buys for a historically weak September.

Delving Into the 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 11.

Here are five of the 11 stocks that fit the bill:

Ohio-based Vertiv Holdings provides digital infrastructure and continuity solutions. It offers hardware, software, analytics and ongoing services. The company saw a positive earnings estimate revision of 14 cents over the past month for this year. It has an estimated earnings growth rate of 45.8%. 

Vertiv Holdings 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.

Massachusetts-based Charles River is one of the leading global consulting firms. The company functions through a global network of coordinated offices across North America and Europe. The stock saw a positive earnings estimate revision of 37 cents over the past 30 days for this year. It has an expected earnings growth rate of 26.9%.

Charles River has a Zacks Rank #1 and a Growth Score of B.

Massachusetts-based Cabot is a leading global specialty chemicals and performance materials company. The company offers a broad range of products and solutions catering to major industries such as transportation, infrastructure, environment and consumer. Cabot saw a positive earnings estimate revision of 29 cents over the past 30 days for the fiscal year ending September 2024. The expected earnings growth rate is 31.4%.

Cabot has a Zacks Rank #2 and a Growth Score of A.

Delaware-based Leidos Holdings is a global science and technology leader that serves the defense, intelligence, civil and health markets. It saw a positive earnings estimate revision of 17 cents over the past 30 days for this year and has an estimated earnings growth rate of 22.6%. 

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

Tennessee-based HCA Healthcare is the largest non-governmental operator of acute care hospitals in the United States. The company saw a positive earnings estimate revision of 13 cents over the past 30 days for this year, with an estimated earnings growth rate of 17.4%.

HCA Healthcare has a Zacks Rank #1 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.

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