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5 Stocks to Build a Solid Dividend Growth Portfolio
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Given the uncertainty surrounding Trump trade, investors are once again in search of consistent income backed by growth aspects. In such a scenario, nothing is perhaps better than dividend growth stocks for an investor.
Why Dividend Growth Stocks?
Dividend growth stocks offer the best of both worlds –– potential for capital appreciation and rising income even in a volatile market. This is because these stocks belong to mature companies, which are less susceptible to large swings in the market, while simultaneously offer outsized payouts or sizable yields on a regular basis irrespective of the market direction.
Stocks that have a strong history of dividend growth have superior fundamentals and form a healthy and safe portfolio as opposed to those that have high yields. Dividend growth reflects a sustainable business model, a long track of profitability, rising cash flows, good liquidity, a strong balance sheet and some value characteristics. All these superior fundamentals make dividend growth stocks quality and promising investments for the long term. Further, a history of strong dividend growth indicates that hike is likely in the future.
Though these stocks have a long history of outperformance compared with the broader stock market or any other dividend paying stock, it does not necessarily mean that they have the highest yields.
As a result, picking dividend growth stocks appear as winning strategies 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 revenue.
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 a 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 one year.
Zacks Rank Less than 3: Stocks having a Zacks Rank #1 (Strong Buy) and 2 (Buy) generally outperform their peers in all types of market environment.
VGM Style Score of B or better: This is simply a weighted combination of Value, Growth and Momentum. This when combined with a Zacks Rank #1 or #2 offers the best upside potential.
Here are five of the 25 stocks that fit the bill:
EnerSys (ENS - Free Report) ): This Pennsylvania-based company is a global leader in stored energy solutions for industrial applications. It saw solid earnings estimate revision of 10 cents for the full fiscal year (ending Mar 2018) over the past three months, and has an expected earnings growth of 7.15%. It has a Zacks Rank #2 and a VGM Style Score of A.
Broadcom Limited (AVGO - Free Report) : This Singapore-based company designs, develops and supplies a range of complex digital and mixed signal complementary metal oxide semiconductor based devices and analog III-V based products worldwide. The stock saw a solid earnings estimate revision of 81 cents for the full fiscal year (ending Oct 2017) over the past 90 days and has an expected earnings growth rate of 32.04%. The stock has a VGM Style Score of B and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Tallgrass Energy Partners LP : This Kansas-based company owns, operates, acquires and develops midstream energy assets primarily in North America. It saw a significant positive earnings estimate revision of 95 cents for the full fiscal year (ending Dec 2017) over the past 90 days, and has an expected growth rate of 45.12%. Tallgrass has a Zacks Rank #2 with a VGM Style Score of B.
Huntington Ingalls Industries, Inc. (HII - Free Report) : This Virginia-based company is engaged in designing, building, overhauling, and repairing ships primarily for the U.S. Navy and the U.S. Coast Guard. The stock saw solid earnings estimate revision by 88 cents over the past 90 days for the full fiscal year (ending December 2017), with an expected earnings growth rate of 11.13%. It has a Zacks Rank #1 and a VGM Style Score of A.
Lear Corporation (LEA - Free Report) : This Michigan-based company is a global leader in designing, developing, engineering, manufacturing, assembling and supplying automotive seating, electrical distribution systems and related components primarily to automotive original equipment manufacturers worldwide. The stock saw positive earnings estimate revision of $1.07 over the past 90 days for the full fiscal year (ending Dec 2017) and has an expected earnings growth rate of 10.41%. It has a Zacks Rank #1 and a VGM Style Score of A.
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.
Zacks Restaurant Recommendations: In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »
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5 Stocks to Build a Solid Dividend Growth Portfolio
Given the uncertainty surrounding Trump trade, investors are once again in search of consistent income backed by growth aspects. In such a scenario, nothing is perhaps better than dividend growth stocks for an investor.
Why Dividend Growth Stocks?
Dividend growth stocks offer the best of both worlds –– potential for capital appreciation and rising income even in a volatile market. This is because these stocks belong to mature companies, which are less susceptible to large swings in the market, while simultaneously offer outsized payouts or sizable yields on a regular basis irrespective of the market direction.
Stocks that have a strong history of dividend growth have superior fundamentals and form a healthy and safe portfolio as opposed to those that have high yields. Dividend growth reflects a sustainable business model, a long track of profitability, rising cash flows, good liquidity, a strong balance sheet and some value characteristics. All these superior fundamentals make dividend growth stocks quality and promising investments for the long term. Further, a history of strong dividend growth indicates that hike is likely in the future.
Though these stocks have a long history of outperformance compared with the broader stock market or any other dividend paying stock, it does not necessarily mean that they have the highest yields.
As a result, picking dividend growth stocks appear as winning strategies 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 revenue.
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 a 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 one year.
Zacks Rank Less than 3: Stocks having a Zacks Rank #1 (Strong Buy) and 2 (Buy) generally outperform their peers in all types of market environment.
VGM Style Score of B or better: This is simply a weighted combination of Value, Growth and Momentum. This when combined with a Zacks Rank #1 or #2 offers the best upside potential.
Here are five of the 25 stocks that fit the bill:
EnerSys (ENS - Free Report) ): This Pennsylvania-based company is a global leader in stored energy solutions for industrial applications. It saw solid earnings estimate revision of 10 cents for the full fiscal year (ending Mar 2018) over the past three months, and has an expected earnings growth of 7.15%. It has a Zacks Rank #2 and a VGM Style Score of A.
Broadcom Limited (AVGO - Free Report) : This Singapore-based company designs, develops and supplies a range of complex digital and mixed signal complementary metal oxide semiconductor based devices and analog III-V based products worldwide. The stock saw a solid earnings estimate revision of 81 cents for the full fiscal year (ending Oct 2017) over the past 90 days and has an expected earnings growth rate of 32.04%. The stock has a VGM Style Score of B and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Tallgrass Energy Partners LP : This Kansas-based company owns, operates, acquires and develops midstream energy assets primarily in North America. It saw a significant positive earnings estimate revision of 95 cents for the full fiscal year (ending Dec 2017) over the past 90 days, and has an expected growth rate of 45.12%. Tallgrass has a Zacks Rank #2 with a VGM Style Score of B.
Huntington Ingalls Industries, Inc. (HII - Free Report) : This Virginia-based company is engaged in designing, building, overhauling, and repairing ships primarily for the U.S. Navy and the U.S. Coast Guard. The stock saw solid earnings estimate revision by 88 cents over the past 90 days for the full fiscal year (ending December 2017), with an expected earnings growth rate of 11.13%. It has a Zacks Rank #1 and a VGM Style Score of A.
Lear Corporation (LEA - Free Report) : This Michigan-based company is a global leader in designing, developing, engineering, manufacturing, assembling and supplying automotive seating, electrical distribution systems and related components primarily to automotive original equipment manufacturers worldwide. The stock saw positive earnings estimate revision of $1.07 over the past 90 days for the full fiscal year (ending Dec 2017) and has an expected earnings growth rate of 10.41%. It has a Zacks Rank #1 and a VGM Style Score of A.
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.
Zacks Restaurant Recommendations: In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »