6 Great Dividend Stocks For Income And Growth

Amid volatility, investors generally look for both income and growth in their portfolios. This can easily be achieved by honing in on stocks that not only pay out dividends but also consistently increase their payout.  

Inside Dividend Growth Investing

Dividend growth stocks form a healthy portfolio with more scope for capital appreciation as opposed to those that pays high yields. This is because stocks that have a history of strong dividend growth immune an investor’s portfolio to large swings in stock prices in turbulent times. Simultaneously, these offer outsized payouts or sizable yields on a regular basis irrespective of the market direction.
 
Additionally, these stocks have superior fundamentals compared with other dividend paying stocks as 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 make dividend growth a quality and promising investment for the long term.

However, the long history of outperformance by dividend growth stocks compared with the broader stock market or any other dividend paying stocks 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 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.

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

Here are seven of the 23 stocks that fit the bill:

Texas Instruments Incorporated (TXN – Free Report) : This is a Texas-based global semiconductor company and one of the world’s leading designers and suppliers of digital signal processors and analog integrated circuits, the engines driving the digitization of electronics. It saw solid earnings estimate revision of 27 cents for this year over the past 90 days with an expected earnings growth of 9.86%. The stock has a VGM Style Score of B and sports a Zacks Rank #1. 

Host Hotels & Resorts Inc. (HST – Free Report) : This is a Maryland-based lodging real estate company primarily engaged in the ownership and operation of hotel properties. The stock delivered an average positive earnings surprise of 5.53% in the past four quarters. It has a Zacks Rank #2 and a VGM Style Score of C.

Steel Dynamics Inc. (STLD – Free Report) : This Indiana-based company is engaged in the manufacture and sale of steel products; processes and sells recycled ferrous and nonferrous metals; and fabricates and sells steel joist and deck products in the United States and internationally. The company saw solid earnings estimate revision of 55 cents over the past 90 days for this year and has an expected growth rate of 30%. It has a Zacks Rank #1 and a VGM Style Score of A.

Trinity Industries Inc. (TRN – Free Report) : This Texas-based company is engaged in the manufacture, marketing, and leasing of a wide variety of products and services for the energy, transportation, chemical, and construction sectors in the United States and internationally. The stock delivered an average positive earnings surprise of 14.37% in three of the past four quarters. It has a Zacks Rank #2 with 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 whopping earnings estimate revision of 90 cents for this year over the past 90 days with an expected earnings growth of 9.28%. It has a Zacks Rank #2 and a VGM Style Score of A.

Scripps Networks Interactive Inc. (SNI – Free Report) : This Tennessee-based company is the leading developer of lifestyle-oriented content for linear and interactive video platforms in the United States, the United Kingdom and other European markets, the Middle East and Africa, the Asia-Pacific, and Latin America. The stock delivered an average positive earnings surprise of 27.89% in the past four quarters and saw positive earnings estimate revision of four cents for this year over the past 90 days. It has a Zacks Rank #2 with a VGM Style Score of A.