The stock market is marching higher, hitting multiple fresh highs amid Washington turmoil, geopolitical risks and lofty valuation. In such a scenario, dividend investing seems a perfect choice. These cash payouts are major sources of consistent income for investors when returns from the equity market are at risk.
In particular, stocks that have a strong history of dividend growth as opposed to those that pay high yields form a healthy portfolio with more scope for capital appreciation.
Why Dividend Growth Investing Is Better?
Dividend growth stocks offer the best of both worlds –– potential for capital appreciation and rising income even in a volatile market. This is because these stocks belong to mature companies, which are less susceptible to large swings in the market, while simultaneously offer outsized payouts or sizable yields on a regular basis irrespective of the market direction.
Dividend growth reflects a sustainable business model, a long track of profitability, rising cash flows, good liquidity, a strong balance sheet and some value characteristics. All these superior fundamentals make dividend growth stocks quality and promising investments for the long term. Further, a history of strong dividend growth indicates that hike is likely in the future.
Though these stocks have a long history of outperformance compared with the broader stock market or any other dividend paying stock, it does not necessarily mean that they have the highest yields.
Here are six of the 24 stocks that fit the bill:
Delta Air Lines, Inc. (NYSE:DAL): This Georgia-based company is America’s fastest growing international carrier that provides scheduled air transportation for passengers and cargo in the United States and internationally.
The company has seen solid earnings estimate revision of 38 cents over the past 90 days for this year and has an expected earnings growth rate of 3.26%. It has a VGM Style Score of A and sports a Zacks Rank #1.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Cummins Inc. (NYSE:CMI): This Indiana-based company is one of the leading worldwide designers and manufacturers of diesel engines. It has seen solid earnings estimate revision of $1.24 for this year over the past three months, and delivered an average positive earnings surprise of 14.52% for the past four quarters. It has a Zacks Rank #2 and a VGM Style Score of B.
Aetna Inc (NYSE:AET): Based in Connecticut, this is one of the nation’s largest health benefits companies and insurance and financial services organizations. The stock has seen positive earnings estimate revision of 16 cents over the past 90 days for this year with an expected earnings growth rate of 9.28%. The stock has a Zacks Rank #2 and a VGM Style Score of A.
H & R Block Inc (NYSE:HRB): This Missouri-based H&R Block is a diversified company involved in tax return preparation, electronic filing of income tax returns and other tax-related services.
The company has seen strong earnings estimate revision of 21 cents over the past 90 days for this fiscal year and delivered an average positive earnings surprise of 8.95% for the last four quarters. It has a Zacks Rank #1 and a VGM Style Score of A.
MKS Instruments, Inc. (NASDAQ:MKSI): This Massachusetts-based company is a leading worldwide developer, manufacturer and supplier of instruments, components and subsystems used to measure, control and analyze gases in semiconductor manufacturing and similar industrial manufacturing processes.
The company has seen strong earnings estimate revision of 41 cents over the past 90 days for this year and has an expected earnings growth rate of 77.06%. It has a Zacks Rank #1 and a VGM Style Score of B.
Torchmark Corporation (NYSE:TMK): This Texas-based financial services holding company specializes in life and supplemental health insurance for middle-income Americans. It has seen positive earnings estimate revision of a nickel for this year over the past three months, with an expected earnings growth rate of 4.13%. The stock has a Zacks Rank #2 with a VGM Style 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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