7 Dividend Stocks That Promise Stability And Growth

Ahead of the presidential elections, dividend investing is again in vogue. Investors are looking for both income and growth in their portfolios irrespective of market conditions. This can easily be achieved by honing in on stocks that not only offer dividends but also consistently increase their payout.  

Inside Dividend Growth Strategy

Stocks that have a strong history of dividend growth as opposed to those that pays high yields from a healthy portfolio with more scope for capital appreciation. This is because these stocks act as a hedge against economic or political uncertainty and stock market volatility. Simultaneously, these offer outsized payouts or sizable yields on a regular basis irrespective of the market direction.

Additionally, these pose 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 a promising investment amid market turbulence. Further, a history of strong dividend growth indicates that a future hike is likely. This makes the portfolio healthy and safe.

Furthermore, these have a long history of outperformance over the long term. However, it does not necessarily mean that they have the highest yields.

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.

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 to 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 (Median): 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 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. This when combined with a Zacks Rank #1 or #2 offers the best upside potential.

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

Here are seven of the 17 stocks that fit the bill:

Activision Blizzard Inc. (ATVI – Analyst Report) : This California-based company is a worldwide pure-play online and console game publisher with leading market positions across all categories of the rapidly growing interactive entertainment software industry. The stock saw solid earnings estimate revision of 18 cents over the past 90 days for this year with an expected earnings growth rate of 52.7%. It has a Zacks Rank #1 (Strong Buy) and a VGM Style Score of B.