5 Solid Dividend Growth Stocks To Counter Choppy Markets

No doubt, dividends are always the major sources of consistent income for investors when returns from price movements of stocks are at risk. In particular, stocks that have a strong history of dividend growth as opposed to those that pays high yields form a healthy portfolio with more scope for capital appreciation.

Why Dividend Growth?

Stocks that have a history of enhancing shareholder returns generally act as a hedge against economic uncertainty or stock market volatility.

Additionally, these stocks have superior fundamentals compared to other dividend paying stocks as dividend growth poses 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 promising investment amid market turbulence.

Further, these are proven outperformers over the long term despite the fact that they do not necessarily have the highest yields.

Hence, to find stocks with a solid dividend growth history, we have focused on 5-Year Historical Dividend Growth of more than zero. The combination of this metric with other exciting parameters could result in a winning portfolio:

Other Parameters:

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 in the future even in 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 3: Stocks having a Zacks Rank #1 (Strong Buy), 2 (Buy) and 3 (Hold) 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.

Here are five of the 16 stocks that fit the bill:

Tyson Foods Inc. (NYSE:TSN) : This Arkansas-based company is one of the world’s largest producers of chicken, beef, pork and prepared foods, offering a wide range of protein-based and prepared food products. It saw positive earnings estimate revisions of a couple of cents for fiscal 2016 over the past 30 days, with an expected above-average growth rate of 37.54%. The stock has a Zacks Rank #2 and a VGM Style Score of A.

Lear Corporation (NYSE:LEA) : 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 has an above-industry earnings growth rate of 19.69% for this year. It has a Zacks Rank #1 and a VGM Style Score of A.

Torchmark Corporation (NYSE:TMK) : This is a Texas-based financial services holding company specializing in life and supplemental health insurance for middle-income Americans. Its earnings are expected to growth at rate of 5.46% for this year. The stock has a Zacks Rank #3 and a VGM Style Score of A.

Lexington Realty Trust (NYSE:LXP) : This New York City-based company is a real estate investment trust engaged in the ownership, operation and management of a diverse portfolio of real properties. The stock saw earnings estimate revision of a penny for this year over the past 30 days and delivered a positive earnings surprise of 7.59% over the past four quarters. It has a Zacks Rank #3 and a VGM Style Score of B.

DTE Energy Company (NYSE:DTE) : This Michigan-based company is a diversified energy company involved in the development and management of energy-related businesses and services nationwide. Its earnings are expected to growth at rate of 2.70% for this year. The stock has a Zacks Rank #2 and a VGM Style 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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