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5 Top-Ranked Dividend Stocks for Growth of Your Portfolio

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The stock market has witnessed weakness in recent weeks. Against such a backdrop, investors are increasingly exploring strategies that will help them protect their portfolios from downsides. Nothing seems better than the strategy of dividend investing. 

Picking 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 — HCA Healthcare Inc. (HCA - Free Report) , Taiwan Semiconductor Manufacturing Company Ltd. (TSM - Free Report) , H&R Block Inc. (HRB - Free Report) , Leidos Holdings Inc. (LDOS - Free Report) and The TJX Companies Inc. (TJX - Free Report) — that could be solid choices for your portfolio.

A Look at the 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.

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 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 sales.

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 more than 7,700 stocks to just 14.

Here are five of the 14 stocks that fit the bill:

Tennessee-based HCA Healthcare is the largest non-governmental operator of acute care hospitals in the United States. The company has an estimated earnings growth rate of 14.9% for this year and delivered an average earnings surprise of 8.24% for the past four quarters.

HCA Healthcare has a Zacks Rank #1 and a Growth Score of B. You can see the complete list of today’s Zacks #1 Rank stocks here.

Taiwan-based Taiwan Semiconductor is the world's largest dedicated integrated circuit foundry. The company has seen a solid earnings estimate revision of 24 cents over the past 30 days for this year and has an estimated earnings growth rate of 22.97%. 

TSM has a Zacks Rank #1 and a Growth Score of B.

Missouri-based H&R Block is a leading provider of tax preparation services. The company provides assisted income tax return preparation, do-it-yourself tax solutions and other products and services associated with income tax return preparation in the United States, Canada and Australia. H&R Block has an estimated earnings growth rate of 10.9% for the fiscal year ending June 2025 and delivered an average earnings surprise of 10.30% for the past four quarters.

H&R Block has a Zacks Rank #2 and a Growth Score of A.

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 23.49% in the past four quarters. 

Leidos Holdings has a Zacks Rank #2 and has a Growth Score of A.

Massachusetts-based TJX Companies is a leading off-price retailer of apparel and home fashions in the United States and worldwide. The company’s broad range of assortments at varying prices helps it reach out to a broad range of consumers. TJX has an estimated earnings growth rate of 8.8% for the fiscal year ending January 2025 and delivered an average earnings surprise of 6.23% in the past four quarters. 

TJX Companies 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..

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