5 Top Dividend Growth Stocks to Buy on the Cheap
The simple monetary policy increases the attractiveness for dividend investments. While the strategy does not offer a dramatic increase in price, it is an important source of income for investors in any type of market. Honing stocks with a history of dividend growth results in a healthy portfolio with greater capital appreciation as opposed to simple dividend-paying stocks or those with high yields.
Why is dividend growth better?
Stocks with a strong history of dividend growth belong to mature companies that are less prone to large market fluctuations and thus act as a hedge against economic or political uncertainty, as well as against the volatility of the stock markets. At the same time, these offer downward protection with a consistent increase in payouts.
Additionally, these stocks have superior fundamentals that make dividend growth a high quality and promising investment over the long term. This includes a sustainable business model, a long profitability track, increasing cash flows, good liquidity, a strong balance sheet and some value traits. Additionally, a history of strong dividend growth suggests that a dividend hike is likely in the future.
While these stocks may not have the highest returns, they have outperformed the broader stock market or other dividend-paying stocks for a longer period of time.
As a result, choosing dividend growth stocks appears like a winning strategy, albeit with a few other parameters taken into account.
Historic 5 Year Dividend Growth Greater Than Zero: This selects stocks with a solid dividend growth history.
Historical 5 Year Sales Growth Greater Than Zero: These are stocks with strong sales growth.
Historic 5 Year EPS Growth Greater Than Zero: These are stocks with solid earnings growth histories.
EPS growth rate greater than zero over the next 3 to 5 years: This is the rate at which a company's earnings are expected to grow. Improving profits should help companies keep dividend payments going.
Price / Cash Flow Below M-Industry: A ratio below M-Industry indicates that the stock is undervalued in that industry and that an investor will have to pay less for better company cash flow.
52-week price change greater than S&P 500 (market weight): This ensures the stock outperformed the S&P 500 over the past year.
Top Zacks Rank: Stocks with a Zacks rank of 1 (strong buy) and 2 (buy) generally outperform their competitors in all types of market environments.
Growth factor of B or better: Our research shows that stocks with a growth value of A or B combined with a Zacks rank 1 or 2 offer the best upside potential.
P / E ratio below X-Industry: A ratio below X-Industry indicates the stock is cheap and undervalued in this industry.
These few criteria have narrowed the universe of over 7,700 stocks to just 13.
Here are five of the 13 stocks that fit the bill:
TeleTech Holdings Inc., based in Colorado TTEC is a customer experience, technology, and services company focused on the design, implementation, and delivery of customer experiences. The company has a P / E of 22.31 versus the industry average of 34.73. Earnings are expected to increase 51.8% this year. The stock has a Zacks Rank 1 and a growth value of A. The full list of today's Zacks Rank 1 stocks can be found here.
Thermo Fisher Scientific Inc., headquartered in Massachusetts, is a provider of analytical equipment, instruments, reagents and supplies, software and services for research, manufacture, analysis, discovery and diagnosis worldwide. It has a P / E of 25.11 versus the industry average of 57.24 and an expected earnings growth rate of 46.5% for this year. The stock has a Zacks rank of 2 and a growth value of B.
Best Buy Company Inc., based in Minnesota, BBY is a multinational retailer of consumer electronics, home office products, entertainment software, communications, food preparation, wellness, health, safety, home appliances, and related services. The company has a PER of 16.45 versus the industry average of 17.03. Earnings are expected to grow 18% this year. The stock is ranked 2 Zacks and has a growth value of A.
Ohio-based ParkerHannifin Corporation PH is a globally diversified manufacturer of motion and control technologies and systems. The company has a P / E of 22.41 versus the industry average of 28.20 and an expected earnings growth rate of 9.6% for the fiscal year ended June 2021. It has a Zacks rank 2 and a growth value of B.
Nu Skin Enterprises Inc., based in Utah, NUS, develops and sells a wide range of high-quality cosmetic, beauty, personal care and wellness products. The company has a P / E of 15.03 versus the industry average of 39.20. Earnings are expected to grow 9.3% this year. It has a Zacks rank 1 and a growth value of A.
You can get the rest of the stocks on this list by signing up for your two-week free trial now on the Research Wizard and using this screen for your own trading. In addition, you can also create your own strategies and test them out first before making the investment leap.
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Disclosure: Zacks Investment Research officers, directors and / or employees may own or have sold short securities and / or hold long and / or short positions in options referred to in this material. An affiliate investment adviser may own or have sold short securities and / or hold long and / or short positions in options referred to in this material.
Disclosure: For performance information on Zacks' portfolios and strategies, please visit: https://www.zacks.com/performance.
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Best Buy Co., Inc. (BBY): Free Stock Analysis Report
TeleTech Holdings, Inc. (TTEC): Free Stock Analysis Report
ParkerHannifin Corporation (PH): Free Stock Analysis Report
Thermo Fisher Scientific Inc. (TMO): Report on Free Stock Analysis
Nu Skin Enterprises, Inc. (NUS): Free Stock Research Report
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