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Dividend investing continues to be popular. This strategy focuses on companies that not only pay dividends but also consistently increase them over time. This approach offers a unique blend of income and growth potential, appealing to a broad range of investors, from those seeking steady income to those aiming for long-term capital appreciation. Additionally, it can provide a sense of security in times of market uncertainty or downturns.
In fact, 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 that have high yields. We have selected five dividend growth stocks — Leidos Holdings Inc. (LDOS - Free Report) , Trane Technologies (TT - Free Report) , Cabot Corporation (CBT - Free Report) , Vertiv Holdings Co. (VRT - Free Report) and Charles River Associates (CRAI - Free Report) — 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.
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 to be 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 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 have narrowed down the universe from over 7,700 stocks to just six.
Here are five of the six 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 22.9% for this year. It delivered an average earnings surprise of 23.49% in the past four quarters.
Ireland-based Trane Technologies is a designer, manufacturer, seller and servicer of climate control products for heating, ventilation, air conditioning and transport solutions. The stock saw a positive earnings estimate revision of 27 cents over the past 30 days for this year, with the expected earnings growth rate being 19%.
Trane Technologies has a Zacks Rank #2 and a Growth Score of B.
Massachusetts-based Cabot Corporation 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 Corporation saw a positive earnings estimate revision of 19 cents over the past 30 days for the fiscal year ending September 2024. The expected earnings growth rate is 29.5%.
Cabot Corporation has a Zacks Rank #2 and a Growth Score of A.
Ohio-based Vertiv Holdings provides digital infrastructure and continuity solutions. It offers hardware, software, analytics and ongoing services. The company saw a positive earnings estimate revision of 14 cents over the past month for this year. It has an estimated earnings growth rate of 45.8%.
Vertiv Holdings has a Zacks Rank #1 and a Growth Score of A.
Massachusetts-based Charles River is one of the leading global consulting firms. The company functions through a global network of coordinated offices across North America and Europe. The stock saw a positive earnings estimate revision of 56 cents over the past 30 days for this year. It has an expected earnings growth rate of 23.6%.
Charles River has a Zacks Rank #1 and a Growth Score of B.
You can get the remaining stock 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.
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5 Dividend Growth Stocks to Boost Your Portfolio
Dividend investing continues to be popular. This strategy focuses on companies that not only pay dividends but also consistently increase them over time. This approach offers a unique blend of income and growth potential, appealing to a broad range of investors, from those seeking steady income to those aiming for long-term capital appreciation. Additionally, it can provide a sense of security in times of market uncertainty or downturns.
In fact, 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 that have high yields. We have selected five dividend growth stocks — Leidos Holdings Inc. (LDOS - Free Report) , Trane Technologies (TT - Free Report) , Cabot Corporation (CBT - Free Report) , Vertiv Holdings Co. (VRT - Free Report) and Charles River Associates (CRAI - Free Report) — 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.
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 to be 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 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 have narrowed down the universe from over 7,700 stocks to just six.
Here are five of the six 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 22.9% for this year. It delivered an average earnings surprise of 23.49% 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.
Ireland-based Trane Technologies is a designer, manufacturer, seller and servicer of climate control products for heating, ventilation, air conditioning and transport solutions. The stock saw a positive earnings estimate revision of 27 cents over the past 30 days for this year, with the expected earnings growth rate being 19%.
Trane Technologies has a Zacks Rank #2 and a Growth Score of B.
Massachusetts-based Cabot Corporation 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 Corporation saw a positive earnings estimate revision of 19 cents over the past 30 days for the fiscal year ending September 2024. The expected earnings growth rate is 29.5%.
Cabot Corporation has a Zacks Rank #2 and a Growth Score of A.
Ohio-based Vertiv Holdings provides digital infrastructure and continuity solutions. It offers hardware, software, analytics and ongoing services. The company saw a positive earnings estimate revision of 14 cents over the past month for this year. It has an estimated earnings growth rate of 45.8%.
Vertiv Holdings has a Zacks Rank #1 and a Growth Score of A.
Massachusetts-based Charles River is one of the leading global consulting firms. The company functions through a global network of coordinated offices across North America and Europe. The stock saw a positive earnings estimate revision of 56 cents over the past 30 days for this year. It has an expected earnings growth rate of 23.6%.
Charles River has a Zacks Rank #1 and a Growth Score of B.
You can get the remaining stock 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.