Zacks: Buy These 5 Dividend Growth Stocks Now

pay me now dividendZacks Equity Research: With uncertainty ruling the markets since the beginning of the year, it’s not surprising that dividend investing has emerged as one of the most popular investing themes. Dividends are major sources of consistent income for investors when returns from price movements of stocks are at risk.

Why Choose Dividend Growth

There are multiple styles of dividend investing out of which dividend growth is the most appealing. Stocks with dividend growth generally outperform their peers and generate increased profits year after year. Thus, the dividend growth strategy has an edge over the steady dividend strategy. By investing in stocks with dividend growth, investors can enjoy rising current income while awaiting capital appreciation.

Dividend growth stocks also provide some margin of safety, which enables investors to withstand shocks. In fact, stocks that have a strong history of dividend growth, as opposed to those that have high yields, form a healthy portfolio.

Moreover, these stocks often have superior fundamentals compared to other dividend paying stocks. This is because dividend growth is often an outcome of a sustainable business model, a long track record of profitability, rising cash flows, good liquidity, a strong balance sheet and some value characteristics.

Here are the screening parameters that could result in a winning dividend growth portfolio:

5-Year Historical Dividend Growth greater than zero: This selects stocks with a solid dividend growth history.

Most Recent Payout Ratio less than M-Industry: This is the measure of dividend payments as a percentage of earnings. A relatively low payout ratio indicates the company’s ability to increase dividend even during tough times.

5-Year Historical Sales Growth greater than zero: This selects stocks with a strong record of revenue growth.

5-Year Historical EPS Growth greater than zero: This shortlists 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.

52-Week Price Change greater than S&P 500 (Median): This ensures that the stock appreciated more than the S&P 500 over the past one year.

Zacks Rank Less than or Equal to 2: Stocks having a Zacks Rank #1 (Strong Buy) or 2 (Buy) generally perform better than 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.

Market Capitalization greater than $2 billion: We have eliminated small-cap stocks to ensure better flexibility and tradability.

(…)Click here to continue reading the original ETFDailyNews.com article: Zacks: Buy These 5 Dividend Growth Stocks Now

You are viewing an abbreviated republication of ETF Daily News content. You can find full ETF Daily News articles on (www.etfdailynews.com)

Powered by WPeMatico