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5 Value Stocks with Great Dividend Growth Prospects

Our metrics help position investors for investing success

5 Value Stocks with Great Dividend Growth ProspectsPresident Trump’s pro-growth agenda has largely fueled the stock market rally of the recent times. However, from a geopolitical perspective, Trump’s election has intensified anxieties, with the real-estate mogul planning to “greatly strengthen and expand” the country’s nuclear capabilities, raising the possibility of a Cold War-era style arms race.

His tweets on potentially massive changes to U.S. policy on China also raise concerns regarding the economy. Apart from this, a sedate global economic growth remains concern for the investor community in general.

Also, fiscal deficits are likely to push up interest rates and the dollar even further. This, in turn, is likely to hurt the economy in the long run.

Based on such a backdrop, investors are looking for some amount of stability in income and growth attributes. For them, picking stocks that not only pay dividends but also consistently increase the payout appears a winning strategy.

Dividend Growth and Its Importance

A few factors that influence dividend growth include the stock’s sustainable business model, profitability history, rising cash flows, decent liquidity, a strong balance sheet and some other value characteristics. Ideally investors look to invest in stocks that pay dividends and have a decent dividend growth history.

For investors with sufficient time in hand, investing in dividend growth stocks is a great way to compound wealth over time, with the added benefit of providing a stream of cash along the way.

However, these stocks are not a fixed income substitute and should not be used as a “safety net” investment by investors who cannot handle the volatility of owning stocks. Although these stocks offer good downside protection and long-term outperformance compared to their peers, they are prone to be volatile and faces risks of permanent losses compared to high-quality bonds.

Screening Parameters

At Zacks, we help you find the stocks that are poised to reap significant returns for your portfolio. Using our Zacks Stock Screener, we have listed five stocks that best fit the following parameters:

  • Five-Year Historical Dividend Growth Greater than 20%: This selects stocks with a solid dividend growth history.
  • Dividend Yield Greater than 2%: This represents how much the company is paying out in dividends each year relative to its share price.
  • Zacks Rank #2 or Better: Stocks having a Zacks Rank #1 (Strong Buy) or 2 (Buy) generally outperform their peers in all types of market environment.
  • VGM Style Score of B or Better: This is simply a weighted combination of Value, Growth and Momentum. This when combined with a Zacks Rank #1 or #2 offers the best upside potential.

Here are five of the 21 stocks that fit the bill:

Out front Media Inc (OUT)

Dividend Yield: 4.76%

Dividend Growth: 24%

Headquartered in New York, Outfront Media Inc (OUT) is a leading provider of out-of-home advertising space in key markets throughout the U.S. and Canada. With its billboard, transit and digital displays, the company provides advertising services to diverse industries across 25 largest markets in the U.S. and more than 150 markets in the U.S and Canada.

 

Also, over the four trailing quarters, the company beat estimates on all occasions, with a positive average return of 11.26%.

Seagate Technology PLC (STX):

Dividend Yield: 4.78%

Dividend Growth: 20.9%

Headquartered at Dublin, Ireland, Seagate Technology PLC (STX) is the second-largest manufacturer of hard disk drives (HDDs) in the U.S. HDDs are used as the primary medium for storing electronic information in systems ranging from desktop computers and consumer electronics to data centers delivering information over corporate networks and the Internet.

Meanwhile, the company’s recent earnings estimates have been encouraging. The current quarter has seen nine upward estimate revisions in the past 60 days. The company’s current-quarter estimates haveincreased from 85 cents to $1.06 in the same time frame.

Texas Instruments Incorporated (TXN):

Dividend Yield: 2.6%

Dividend Growth: 21.4%

Headquartered in Dallas, TX, Texas Instruments Incorporated (TXN) is an original equipment manufacturer of analog, mixed signal and digital signal processing integrated circuits.

For the current quarter, 11 analysts have revised their estimates upward in the past 60 days. The company’s current-quarter estimates have risen from 75 cents to 83 cents in the same time frame.

Western Digital Corp (WDC)

  • Dividend Yield: 2.1%
  • Dividend Growth: 23.9%

Headquartered in Irvine, CA, Western Digital Corp (WDC) is one of the largest hard disk drive (HDD) producers in the U.S. The company designs, develops, manufactures and markets a broad range of HDDs used in desktop PCs, servers, network-attached storage devices, video game consoles, digital video recorders and a host of other consumer electronic devices. The acquisition of SanDisk enabled the company to venture into the flash drive storage technology space.

Over the last one month, current-quarter estimates for Western Digital increased from $1.30 per share to $1.79.

Interpublic Group of Companies Inc (IPG)

Dividend Yield: 2.2%

Dividend Growth: 24.8%

New York-based Interpublic Group of Companies Inc (IPG), together with its subsidiaries, provides advertising and marketing services worldwide. The company is the third largest advertising company in the world. It offers a range of advertising and marketing communication services, as well as marketing services. It also provides public relations, meeting and event production, sports and entertainment marketing, corporate and brand identity, and strategic marketing consulting services to a broad list of customers in more than 100 countries.

Over the last one month, current-year estimates for Interpublic have increased from $1.42 per share to $1.45.

The stock market rally will not last forever. Despite volatility in the market, stocks with high dividends appear to be a solid bet for investors to have a healthy ROI that act as a cushion against the uncertain times.

And for more on dividend growth, check out our recent podcast on the topic below!

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Western Digital Corporation (WDC): Free Stock Analysis Report

Seagate Technology PLC (STX): Free Stock Analysis Report

Interpublic Group of Companies, Inc. (The) (IPG): Free Stock Analysis Report

Texas Instruments Incorporated (TXN): Free Stock Analysis Report

OUTFRONT Media Inc. (OUT): Free Stock Analysis Report

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