Yahoo Finance Boost Your Portfolio With These 5 Dividend Growth Stocks
Uncertainty surrounding the timing of rate cuts has been playing foul on the stock market this year. Against such a backdrop, investors are increasingly exploring strategies that will help them protect their portfolios from downsides. Nothing seems better than the strategy of dividend investing.
Picking stocks with a history of dividend growth leads to a healthy portfolio with a greater scope of capital appreciation as opposed to simple dividend-paying stocks or those with high yields. We have selected five dividend growth stocks — Williams-Sonoma Inc. WSM, The Greenbrier Companies Inc. GBX, Leidos Holdings Inc. LDOS, Booz Allen Hamilton Holding Corporation BAH and Vertiv Holdings Co VRT — which could be solid choices for investors.
A Look at the Strategy
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 a 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.
As a result, picking dividend growth stocks appears as a winning strategy when some other parameters are 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 sales.
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 year.
Top Zacks Rank: Stocks having a Zacks Rank #1 (Strong Buy) or 2 (Buy) generally outperform their peers in all types of market environments.
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 more than 7,700 stocks to just five.
Here are those five stocks that fit the bill:
California-based Williams-Sonoma is a multi-channel specialty retailer of premium quality home products. It saw a solid earnings estimate revision of 80 cents over the past month for the fiscal year ending in January 2025. The company has an estimated earnings growth rate of 8.3%.
Williams-Sonoma sports a Zacks Rank #1 and has a Growth Score of A at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Oregon-based Greenbrier is a leading supplier of transportation equipment and services to the railroad and related industries. The company has an estimated growth rate of 42.4% for the fiscal year ending in August 2024. It delivered an average earnings surprise of 32.96% in the past four quarters.
Greenbrier currently has a Zacks Rank #2 and a Growth Score of A.
Delaware-based Leidos Holdings is a global science and technology leader that serves the defense, intelligence, civil and health markets. It has an estimated earnings growth rate of 15.89% for this year and delivered an average earnings surprise of 23.43% in the past four quarters.
Leidos Holdings flaunts a Zacks Rank #1 and has a Growth Score of B.
Virginia-based Booz Allen is a provider of management and technology consulting, analytics, engineering, digital solutions, mission operations, and cyber expertise to the United States and international governments, corporations, plus not-for-profit organizations. BAH saw a positive earnings estimate revision of 18 cents for the fiscal year ending in March 2025 and has an estimated earnings growth rate of 10%.
Currently, Booz Allen has a Zacks Rank #2 and a Growth Score of B.
Ohio-based Vertiv Holdings provides digital infrastructure and continuity solutions. It offers hardware, software, analytics and ongoing services. The company has an estimated earnings growth rate of 36.7% for this year and delivered an average earnings surprise of 24.18% in the past four quarters.
Vertiv Holdings has a Zacks Rank #2 and a Growth Score of A.
You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and test them first before taking the investment plunge.
The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
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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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Williams-Sonoma, Inc. (WSM) : Free Stock Analysis Report
Booz Allen Hamilton Holding Corporation (BAH) : Free Stock Analysis Report
Greenbrier Companies, Inc. (The) (GBX) : Free Stock Analysis Report
Leidos Holdings, Inc. (LDOS) : Free Stock Analysis Report
Vertiv Holdings Co. (VRT) : Free Stock Analysis Report
