Yahoo Finance 5 Top Dividend Growth Stocks to Buy in the Month of Love
Dividend investing has remained the hottest segment of the stock market over the past year. Though U.S. stocks have resumed their strength this year on easing inflation and the Fed’s slower rate hike bets, recession worries persist. In such a scenario, dividends are major sources of consistent income for investors though they do not offer dramatic price appreciation. Stocks backed by regular dividends can reduce the volatility of a portfolio and tend to outperform in a choppy market.
In particular, focusing on the growth level in this strategy leads to higher returns. 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.
We have selected five dividend growth stocks — Archer-Daniels-Midland Company ADM, Agilent Technologies A, Republic Services Inc. RSG, Deere & Company DE and Cardinal Health Inc. CAH — that investors would love to buy this month.
Why is Dividend Growth Better?
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.
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.
Just these few criteria narrowed down the universe from over 7,700 stocks to just 21.
Here are five of the 21 stocks that fit the bill:
Illinois-based Archer-Daniels is one of the leading producers of food and beverage ingredients as well as goods made from various agricultural products. ADM delivered an average earnings surprise of 28.07%.
Archer-Daniels has a Zacks Rank #1 and a Growth Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.
California-based Agilent Technologies is an original equipment manufacturer of a broad-based portfolio of test and measurement products serving multiple end markets. The company has an estimated earnings growth rate of 8% for the fiscal year (ending October 2023) and delivered an average earnings surprise of 6.74% for the past four quarters.
Currently, A has a Zacks Rank #2 and a Growth Score of B.
Arizona-based Republic Services is the second largest provider of non-hazardous solid waste collection, transfer, disposal, recycling, and energy services in the United States. It has an estimated earnings growth rate of 5.4%.
Republic Services has a Zacks Rank #2 and a Growth Score of B.
Illinois-based Deere & Company is the world’s largest producer of agricultural equipment, manufacturing agricultural machinery since 1837 under the iconic John Deere brand with its signature green and yellow color scheme. The stock saw a solid earnings estimate revision of 3 cents over the past 30 days for the fiscal year (ending October 2023) and has an estimated earnings growth rate of 20.3%.
Deere & Company carries a Zacks Rank #2 and a Growth Score of A.
Ohio-based Cardinal Health is a nation-wide drug distributor and provider of services to pharmacies, healthcare providers and manufacturers. The company has an estimated earnings growth rate of 4.7% for the fiscal year (ending June 2023).
Cardinal Health has a Zacks Rank #2 and a Growth Score of B.
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.
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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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Deere & Company (DE) : Free Stock Analysis Report
Agilent Technologies, Inc. (A) : Free Stock Analysis Report
Archer Daniels Midland Company (ADM) : Free Stock Analysis Report
Cardinal Health, Inc. (CAH) : Free Stock Analysis Report
Republic Services, Inc. (RSG) : Free Stock Analysis Report
