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Wall Street enjoyed a strong rally in the first nine months of 2024, with the three major indices reaching a series of record highs. However, negative sentiments have been building up at the start of the final quarter, given the escalation in Middle East tensions and the upcoming presidential election. 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 — NetApp (NTAP - Free Report) , Agnico Eagle Mines Limited (AEM - Free Report) , ResMed Inc. (RMD - Free Report) , Charles River Associates (CRAI - Free Report) and Leidos Holdings Inc. (LDOS - Free Report) — that could be compelling picks heading into the final quarter.
Dividend Growth: 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 10.
Here are five of the 10 stocks that fit the bill:
California-based NetApp provides enterprise storage as well as data management software and hardware products and services. The stock saw a positive earnings estimate revision of 3 cents over the past seven days for the fiscal year (ending April 2025) and has an estimated earnings growth rate of 9.6%.
Canada-based Agnico Eagle is a gold producer with mining operations in Canada, Mexico and Finland and exploration activities in Canada, Europe, Latin America and the United States. It saw a positive earnings estimate revision of 3 cents over the past seven days for this year. The company has an estimated earnings growth rate of 71.75%.
AEM currently has a Zacks Rank #2 and a Growth Score of B.
California-based ResMed holds a major position as designer, manufacturer, as well as a distributor in the worldwide market for generators, masks, and related accessories for the treatment of sleep-disordered breathing and other respiratory disorders. SDB includes obstructive sleep apnea and other respiratory disorders that occur during sleep. The stock saw a positive earnings estimate revision of 5 cents over the past seven days for the fiscal year (ending June 2025) and has an estimated earnings growth rate of 16.8%.
ResMed has a Zacks Rank #2 and a Growth Score of B.
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 delivered an average earnings surprise of 23.47% in the past four quarters and has an expected earnings growth rate of 26.9%.
Charles River 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 22.6% for this year and delivered an average earnings surprise of 23.49% in the last four quarters.
Leidos Holdings 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 Growth Stocks to Buy in Q4
Wall Street enjoyed a strong rally in the first nine months of 2024, with the three major indices reaching a series of record highs. However, negative sentiments have been building up at the start of the final quarter, given the escalation in Middle East tensions and the upcoming presidential election. 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 — NetApp (NTAP - Free Report) , Agnico Eagle Mines Limited (AEM - Free Report) , ResMed Inc. (RMD - Free Report) , Charles River Associates (CRAI - Free Report) and Leidos Holdings Inc. (LDOS - Free Report) — that could be compelling picks heading into the final quarter.
Dividend Growth: 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 10.
Here are five of the 10 stocks that fit the bill:
California-based NetApp provides enterprise storage as well as data management software and hardware products and services. The stock saw a positive earnings estimate revision of 3 cents over the past seven days for the fiscal year (ending April 2025) and has an estimated earnings growth rate of 9.6%.
NetApp currently 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.
Canada-based Agnico Eagle is a gold producer with mining operations in Canada, Mexico and Finland and exploration activities in Canada, Europe, Latin America and the United States. It saw a positive earnings estimate revision of 3 cents over the past seven days for this year. The company has an estimated earnings growth rate of 71.75%.
AEM currently has a Zacks Rank #2 and a Growth Score of B.
California-based ResMed holds a major position as designer, manufacturer, as well as a distributor in the worldwide market for generators, masks, and related accessories for the treatment of sleep-disordered breathing and other respiratory disorders. SDB includes obstructive sleep apnea and other respiratory disorders that occur during sleep. The stock saw a positive earnings estimate revision of 5 cents over the past seven days for the fiscal year (ending June 2025) and has an estimated earnings growth rate of 16.8%.
ResMed has a Zacks Rank #2 and a Growth Score of B.
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 delivered an average earnings surprise of 23.47% in the past four quarters and has an expected earnings growth rate of 26.9%.
Charles River 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 22.6% for this year and delivered an average earnings surprise of 23.49% in the last four quarters.
Leidos Holdings 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.