Yahoo Finance 5 Dividend Growth Stocks to Buy for Safe Returns
Wall Street is caught in feeble trading triggered by an uncertain Fed policy, growing geopolitical tensions and recession fears. This has compelled investors to look for safe and defensive bets, thus raising the appeal for dividend investing. In fact, applying some smart-beta strategies to the dividend investing world could fetch higher returns.
This is because the strategy helps to capture market inefficiencies in a transparent way by adding extra metrics like volatility, revenues, earnings, momentum and other fundamental factors to the market cap or rules-based indices. And nothing seems better than picking the dividend growth strategy.
We have selected five dividend growth stocks — PulteGroup Inc. PHM, Novartis NVS, Boyd Gaming Corporation BYD, Cummins CMI, and W.W. Grainger Inc. GWW — that could be solid choices for your portfolio.
Why Dividend Growth 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 increase is likely in the future.
Moreover, a history of dividend growth year over year leads to a healthy portfolio with a 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 appear as winning strategies 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 20.
Here are five of the 20 stocks that fit the bill:
Atlanta-based PulteGroup is engaged in homebuilding and financial services businesses, primarily in the United States. The company saw a solid earnings estimate revision of $1.34 over the past 30 days for this year and delivered an average earnings surprise of 15.6% over the past four quarters.
PulteGroup carries a Zacks Rank #1 and has a Growth Score of B. You can see the complete list of today’s Zacks #1 Rank stocks here.
Switzerland-based Novartis has one of the strongest and broadest portfolios of oncology drugs and generics, which has enabled it to maintain its dominant position as a top pharma company over the years. The company saw a solid earnings estimate revision of nine cents over the past 30 days for this year, with estimated growth of 9.2%.
At present, NVS has a Zacks Rank #2 (Buy) and a Growth Score of B.
Las Vegas-based Boyd Gaming 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 a positive earnings estimate revision of 37 cents over the past 30 days for this year and delivered an earnings surprise of 13.69% over the past four quarters.
Boyd Gaming has a Zacks Rank #2 and a Growth Score of B.
Indiana-based Cummins is a leading global designer, manufacturer and distributor of diesel and natural gas engines, and powertrain-related component products. It has seen a solid earnings estimate revision of 70 cents for this year over the past month, and has an estimated earnings growth rate of 30%.
The stock has a Zacks Rank #2 and a Growth Score of B.
Illinois-based W.W. Grainger is a broad-line, business-to-business distributor of maintenance, repair and operating products and services. The company has an estimated growth rate of 18.1% and delivered an average earnings surprise of 9.15% for the past four quarters.
GWW has a Zacks Rank #2 and a Growth Score of A.
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.
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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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Novartis AG (NVS) : Free Stock Analysis Report
Cummins Inc. (CMI) : Free Stock Analysis Report
PulteGroup, Inc. (PHM) : Free Stock Analysis Report
W.W. Grainger, Inc. (GWW) : Free Stock Analysis Report
Boyd Gaming Corporation (BYD) : Free Stock Analysis Report
