5 Top-Ranked Dividend Stocks for Growth
Amid bouts of market volatility, nothing seems to be a better strategy than picking dividend-focused stocks. This is because dividends are a major source of consistent income for investors in any type of market though it does not offer dramatic price appreciation.
While several dividend stocks could provide capital appreciation, honing in on 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.
Peep 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 hike is likely in the future.
Furthermore, these have a long history of outperformance over the long term. However, it does not necessarily mean that they have the highest yields.
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 22.
Here are five of the 22 stocks that fit the bill:
Las Vegas-based Boyd Gaming Corporation BYD is a multi-jurisdictional gaming company. It owns and operates gaming entertainment properties in Nevada, Illinois, Indiana, Iowa, Kansas, Louisiana, Mississippi, Missouri, Ohio and Pennsylvania. The company saw positive earnings estimate revision of a penny over the past 30 days for this year with an expected earnings growth of more than 100%. Boyd Gaming has a Zacks Rank #1 and Growth Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.
California-based Intuit Inc. INTU is a business and financial software company that develops and sells financial, accounting and tax preparation software and related services for small businesses, consumers and accounting professionals globally. The company saw solid earnings estimate revision of $1.00 over the past 30 days for this year with an expected earnings growth rate of 19%. The stock has a Zacks Rank #1 and Growth Score of B.
Indiana-based Cummins Inc. CMI is a leading global designer, manufacturer and distributor of diesel and natural gas engines, and powertrain-related component products. It has seen solid earnings estimate revision of 54 cents for this year over the past month, and has an estimated earnings growth rate of 32.9%. The stock has a Zacks Rank #2 and Growth Score of A.
Illinois-based Caterpillar Inc. CAT is the largest global manufacturer of construction and mining equipment. The company saw positive earnings estimate revision of 11 cents over the past 30 days for this year with an expected earnings growth rate of 47.3%. Caterpillar has a Zacks Rank #2 and Growth Score of A.
Tennessee-based FedEx Corporation FDX is a leader in global express delivery services. The company has an estimated earnings growth rate of 12.6% for the fiscal year (ending May 2022) and saw solid earnings estimate revision of 53 cents over the past month. It has a Zacks Rank #2 and Growth Score of A.
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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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Cummins Inc. (CMI) : Free Stock Analysis Report
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Intuit Inc. (INTU) : Free Stock Analysis Report
FedEx Corporation (FDX) : Free Stock Analysis Report
Boyd Gaming Corporation (BYD) : Free Stock Analysis Report
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