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Amid volatility and low interest rate scenario, investors are zeroing in on stocks that not only offer dividends but also consistently increase their payout. This strategy leads to a healthy portfolio with a greater scope of capital appreciation as opposed to simple dividend paying stocks or those with high yields. Investors should note that dividend-paying securities are the major source of consistent income, when returns from the equity market are at risk.
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 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 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.
Current Price Under $100: Low-priced stocks could be attractive as these will enable investors to buy a greater number of shares instead of just a handful of higher-priced stocks for the same amount.
Just these few criteria narrowed down the universe from over 7,700 stocks to just 21.
Here are five of the 21 stocks that fit the bill:
California-based KB Home (KBH - Free Report) is a well-known homebuilder in the United States and one of the largest in the state. It has seen solid earnings estimate revision of 8 cents over the past 30 days for the fiscal year (ending November 2020) and has an expected earnings growth rate of 29.1%. The stock, currently trading at a price of $38.1, has a Zacks Rank #1 and Growth Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.
New York-based Morgan Stanley (MS - Free Report) is the leading financial services holding company that provides various financial products and services to corporations, governments, financial institutions, and individuals in the Americas, Europe, the Middle East, Africa and Asia. The company has seen solid earnings estimate revision of 20 cents for this year over the past month and has an estimated earnings growth rate of 7.6%. It, trading at $55.03, has a Zacks Rank #1 and Growth Score of B.
New Jersey-based Clearway Energy Inc. (CWEN - Free Report) acquires, owns, and operates contracted renewable energy and conventional generation, and thermal infrastructure assets in the United States. The company has seen solid earnings estimate revision of 10 cents for this year over the past month and has an estimated earnings growth rate of 141.9%. The stock has a Zacks Rank #2 and Growth Score of B. Shares of Clearway Energy are currently trading at $21.57.
Virginia-based Booz Allen Hamilton Holding Corporation (BAH - Free Report) is engaged in providing management and technology consulting services to the U.S. government in the defense, intelligence and civil markets. The company has seen positive earnings estimate revision of a penny over the past 30 days for the fiscal year (March 2020) and has expected earnings growth rate of 13.8%. Booz Allen, trading at $77.43, has a Zacks Rank #2 and Growth Score of A.
California-based Intel (INTC - Free Report) is the world’s largest manufacturer of semiconductor products. The company has seen solid earnings estimate revision of 27 cents for this year over the past month and has an estimated earnings growth rate of 2.5%. It carries a Zacks Rank #2 and has a Growth Score of B. Shares of Intel are currently trading at $66.02.
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 Great Dividend Growth Stocks Under $100
Amid volatility and low interest rate scenario, investors are zeroing in on stocks that not only offer dividends but also consistently increase their payout. This strategy leads to a healthy portfolio with a greater scope of capital appreciation as opposed to simple dividend paying stocks or those with high yields. Investors should note that dividend-paying securities are the major source of consistent income, when returns from the equity market are at risk.
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 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 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.
Current Price Under $100: Low-priced stocks could be attractive as these will enable investors to buy a greater number of shares instead of just a handful of higher-priced stocks for the same amount.
Just these few criteria narrowed down the universe from over 7,700 stocks to just 21.
Here are five of the 21 stocks that fit the bill:
California-based KB Home (KBH - Free Report) is a well-known homebuilder in the United States and one of the largest in the state. It has seen solid earnings estimate revision of 8 cents over the past 30 days for the fiscal year (ending November 2020) and has an expected earnings growth rate of 29.1%. The stock, currently trading at a price of $38.1, has a Zacks Rank #1 and Growth Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.
New York-based Morgan Stanley (MS - Free Report) is the leading financial services holding company that provides various financial products and services to corporations, governments, financial institutions, and individuals in the Americas, Europe, the Middle East, Africa and Asia. The company has seen solid earnings estimate revision of 20 cents for this year over the past month and has an estimated earnings growth rate of 7.6%. It, trading at $55.03, has a Zacks Rank #1 and Growth Score of B.
New Jersey-based Clearway Energy Inc. (CWEN - Free Report) acquires, owns, and operates contracted renewable energy and conventional generation, and thermal infrastructure assets in the United States. The company has seen solid earnings estimate revision of 10 cents for this year over the past month and has an estimated earnings growth rate of 141.9%. The stock has a Zacks Rank #2 and Growth Score of B. Shares of Clearway Energy are currently trading at $21.57.
Virginia-based Booz Allen Hamilton Holding Corporation (BAH - Free Report) is engaged in providing management and technology consulting services to the U.S. government in the defense, intelligence and civil markets. The company has seen positive earnings estimate revision of a penny over the past 30 days for the fiscal year (March 2020) and has expected earnings growth rate of 13.8%. Booz Allen, trading at $77.43, has a Zacks Rank #2 and Growth Score of A.
California-based Intel (INTC - Free Report) is the world’s largest manufacturer of semiconductor products. The company has seen solid earnings estimate revision of 27 cents for this year over the past month and has an estimated earnings growth rate of 2.5%. It carries a Zacks Rank #2 and has a Growth Score of B. Shares of Intel are currently trading at $66.02.
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.