5 Unbeatable Dividend Growth Stocks For A Solid Portfolio

Amid the stock market turbulence, investors are looking for steady income along with some growth attributes. For them, picking stocks that not only pay out dividends but also increase them on a regular basis appears a winning strategy. These cash payouts are major sources of consistent income for investors when returns from the equity market are at risk.

Why Dividend Growth?

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 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. Stocks that have a strong history of dividend growth as opposed to those that offer high yields form a healthy portfolio with more scope for capital appreciation.

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 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.

Top Zacks Rank: Stocks having a Zacks Rank #1 (Strong Buy) and 2 (Buy) generally outperform their peers in all types of market environment.

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 11.

Here are five of the 11 stocks that fit the bill:

New York-based-based Bristol-Myers Squibb Company (NYSE:BMY) is one of the leading global specialty biopharmaceutical companies focused on the development of treatments targeting serious diseases. The company saw positive earnings estimate revision of 4 cents over the past 30 days for this year and has an estimated earnings growth rate of 30.70%. The stock has a Zacks Rank #2 and a Growth Score of B. You can see the complete list of today’s Zacks #1 Rank stocks here.

Pennsylvania-based AmerisourceBergen Corporation (NYSE:ABC) is one of the world’s largest pharmaceutical services companies, which focuses on providing drug distribution and related services to reduce healthcare costs and improve patient outcomes. It has an estimated earnings growth rate of 8.46% for this fiscal year ending September 2020 and delivered average four-quarter positive earnings surprise of 5.73%, on average. The stock has a Zacks Rank #2 and a Growth Score of A.

Delaware-based Leidos Holdings Inc. (NYSE:LDOS) is a global science and technology leader that serves the defense, intelligence, civil and health markets. It has seen upward earnings estimate revision of 3 cents over the past 30 days for this year and has an expected earnings growth rate of 8.70%. The stock has a Zacks Rank #2 and a Growth Score of B.

Minnesota-based Xcel Energy Inc. (NASDAQ:XEL) generates, purchases, transmits, distributes, and sells electricity. The stock has an estimated earnings growth rate of 6.06% for this year. It has a Zacks Rank #2 and a Growth Score of B.

Lowa-based Caseys General Stores Inc. (NASDAQ:CASY) operates convenience stores under the Casey's and Casey's General Store names. The company saw solid earnings estimate revision of 8 cents over the past 30 days for the fiscal year ending April 2020 and has an estimated earnings growth rate of 15.25%. It has a Zacks Rank #2 and Growth Score of B.

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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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