We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
5 Dividend Stocks to Pick for Solid Growth in the Second Half
Read MoreHide Full Article
Wall Street wrapped up a blistering first half driven by a boom in artificial intelligence and an improving economy. The solid trend is likely to continue in the second half but the US presidential election in November and uncertainty about the path of interest rate cuts weigh on the prospects. In such a scenario, dividend investing seems the best choice as it offers consistent and safe income.
Though the strategy does not offer dramatic price appreciation, it is a major source of consistent income for investors in any market. In particular, focusing on the growth level in this strategy leads to higher returns. Stocks with a strong history of year-over-year dividend growth form 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 — Leidos Holdings Inc. (LDOS - Free Report) , Cabot Corporation (CBT - Free Report) , Williams-Sonoma Inc. (WSM - Free Report) , Booz Allen Hamilton Holding Corporation (BAH - Free Report) and Brady Corporation (BRC - Free Report) — that could be compelling picks heading into the second half.
Dividend Growth: Why is it Considered a Winning 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 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.
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) or 2 (Buy) generally outperform their peers in all types of market environments.
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 seven.
Here are five of the seven stocks that fit the bill:
Delaware-based Leidos Holdings is a global science and technology leader that serves the defense, intelligence, civil and health markets. It has an estimated earnings growth rate of 19.9% for this year and delivered an average earnings surprise of 23.43% in the past four quarters.
Morocco-based Cabot is a leading global specialty chemicals and performance materials company. The company offers a broad range of products and solutions, catering to major industries such as transportation, infrastructure, environment and consumer. Cabot has an expected earnings growth rate of 26.02% for the fiscal year (ending September 2024) and delivered an average earnings surprise of 3.80% in the past four quarters.
Cabot has a Zacks Rank #2 and a Growth Score of A.
California-based Williams-Sonoma is a multi-channel specialty retailer of premium quality home products. It saw a solid earnings estimate revision of 16 cents over the past month for the fiscal year (ending January 2025). The company has an estimated earnings growth rate of 8.28%.
Williams-Sonoma sports a Zacks Rank #1 and has a Growth Score of A at present.
Virginia-based Booz Allen is a provider of management and technology consulting, analytics, engineering, digital solutions, mission operations, and cyber expertise to the United States and international governments, corporations, plus not-for-profit organizations. BAH saw a positive earnings estimate revision of 6 cents for the fiscal year (ending March 2025) and has an estimated earnings growth rate of 10%.
Currently, Booz Allen has a Zacks Rank #2 and a Growth Score of B.
Wisconsin-based Brady is a world leader in complete identification solutions that help companies improve productivity, performance, safety and security. Brady's products help customers increase safety, security, productivity and performance and include high-performance labels, signs, safety devices, printing systems and software. The company has an expected earnings growth rate of 13.5% for the fiscal year (ending July 2024) and delivered an average earnings surprise of 6.65% in the past four quarters.
Brady 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.
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.
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.
Image: Bigstock
5 Dividend Stocks to Pick for Solid Growth in the Second Half
Wall Street wrapped up a blistering first half driven by a boom in artificial intelligence and an improving economy. The solid trend is likely to continue in the second half but the US presidential election in November and uncertainty about the path of interest rate cuts weigh on the prospects. In such a scenario, dividend investing seems the best choice as it offers consistent and safe income.
Though the strategy does not offer dramatic price appreciation, it is a major source of consistent income for investors in any market. In particular, focusing on the growth level in this strategy leads to higher returns. Stocks with a strong history of year-over-year dividend growth form 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 — Leidos Holdings Inc. (LDOS - Free Report) , Cabot Corporation (CBT - Free Report) , Williams-Sonoma Inc. (WSM - Free Report) , Booz Allen Hamilton Holding Corporation (BAH - Free Report) and Brady Corporation (BRC - Free Report) — that could be compelling picks heading into the second half.
Dividend Growth: Why is it Considered a Winning 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 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.
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) or 2 (Buy) generally outperform their peers in all types of market environments.
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 seven.
Here are five of the seven stocks that fit the bill:
Delaware-based Leidos Holdings is a global science and technology leader that serves the defense, intelligence, civil and health markets. It has an estimated earnings growth rate of 19.9% for this year and delivered an average earnings surprise of 23.43% in the past four quarters.
Leidos Holdings sports 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.
Morocco-based Cabot is a leading global specialty chemicals and performance materials company. The company offers a broad range of products and solutions, catering to major industries such as transportation, infrastructure, environment and consumer. Cabot has an expected earnings growth rate of 26.02% for the fiscal year (ending September 2024) and delivered an average earnings surprise of 3.80% in the past four quarters.
Cabot has a Zacks Rank #2 and a Growth Score of A.
California-based Williams-Sonoma is a multi-channel specialty retailer of premium quality home products. It saw a solid earnings estimate revision of 16 cents over the past month for the fiscal year (ending January 2025). The company has an estimated earnings growth rate of 8.28%.
Williams-Sonoma sports a Zacks Rank #1 and has a Growth Score of A at present.
Virginia-based Booz Allen is a provider of management and technology consulting, analytics, engineering, digital solutions, mission operations, and cyber expertise to the United States and international governments, corporations, plus not-for-profit organizations. BAH saw a positive earnings estimate revision of 6 cents for the fiscal year (ending March 2025) and has an estimated earnings growth rate of 10%.
Currently, Booz Allen has a Zacks Rank #2 and a Growth Score of B.
Wisconsin-based Brady is a world leader in complete identification solutions that help companies improve productivity, performance, safety and security. Brady's products help customers increase safety, security, productivity and performance and include high-performance labels, signs, safety devices, printing systems and software. The company has an expected earnings growth rate of 13.5% for the fiscal year (ending July 2024) and delivered an average earnings surprise of 6.65% in the past four quarters.
Brady 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.
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.
Click here to sign up for a free trial to the Research Wizard today.
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.