Growing trade and tariff talks between the United States and many other countries across the globe has raised the appeal for dividend growth stocks, which offer income and stability.
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.
Moreover, a history of dividend growth year over year leads to a healthy portfolio with greater scope of capital appreciation as opposed to simple dividend paying stocks or those with high yields. 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.
Here are five of the 10 stocks that fit the bill:
Excellent Dividend Growth Stocks to Evade Trade Fears: Chemours Company (CC)
Delaware-based Chemours Company (NYSE:CC) provides performance chemicals in North America, the Asia Pacific, Europe, and the Middle East, Africa, and Latin America.
It has an estimated earnings growth rate of 48.95% for this year and delivered an average positive earnings surprise of 11.86% in the past four quarters. The stock has a Zacks Rank #1 and a Growth Score of B.
Excellent Dividend Growth Stocks to Evade Trade Fears: MKS Instruments, Inc. (MKSI)
Massachusetts-based MKS Instruments, Inc. (NASDAQ:MKSI) is a global provider of instruments, subsystems, and process control solutions that measure, control, power, monitor and analyze critical parameters of advanced manufacturing processes to improve process performance and productivity.
It delivered an average positive earnings surprise of 4.11% in the past four quarters and has an expected earnings growth rate of 40.10%. It has a Zacks Rank #2 and a Growth Score of A.
Excellent Dividend Growth Stocks to Evade Trade Fears: Magna International Inc. (MGA)
Canada-based Magna International Inc. (NYSE:MGA) is an independent supplier of original equipment components, assemblies, modules and systems and related tooling for cars and light trucks.
It has seen positive earnings estimate revision of 7 cents for this year over the past one month and has an expected earnings growth rate of 18.46%. The stock has a Zacks Rank #2 and a Growth Score of A.
Excellent Dividend Growth Stocks to Evade Trade Fears: Anthem Inc. (ANTM)
Indiana-based Anthem Inc. (NYSE:ANTM) operates as a health benefits company in the United States. The stock has seen positive earnings estimate revision of a penny over the past 30 days for this year and has an expected earnings growth rate of 27.82%.
The stock has a Zacks Rank #2 and a Growth Score of A.
Excellent Dividend Growth Stocks to Evade Trade Fears: Progressive Corp (PGR)
Ohio-based Progressive Corp (NYSE:PGR) provides personal and commercial auto insurance, residential property insurance, and other specialty property-casualty insurance and related services primarily in the United States.
The company has seen positive earnings estimate revision of a 19 cents over the past 30 days for this year and has an expected earnings growth rate of 59.32%. It has a Zacks Rank #2 and a 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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