6 Dividend Growth Stocks To Trump Rising Yield

Dividend stocks lost some of their shine due to rising yields after Republican Donald Trump was elected as the new president. Yet, investors are still adding some of these to their portfolio. In particular, stocks with a strong history of dividend hike year over year are enjoying a solid run.

Why Growth-Focused Dividends

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 irrespective of the stock market direction. This is because these stocks generally act as a hedge against economic uncertainty while simultaneously 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, strong balance sheet and some value characteristics. Further, a history of strong dividend growth indicates that a future hike is likely, which makes the portfolio safer.

Although these stocks do not necessarily have the highest yields, they have outperformed for a longer period than the broad stock market or any other dividend paying stock.

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.

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Here are six of the 12 stocks that fit the bill:

EnerSys (NYSE:ENS) : This Pennsylvania-based company is a global leader in stored energy solutions for industrial applications. It saw solid earnings estimate revision of 19 cents over the past three months, with an expected earnings growth of 16.54%. It has a Zacks Rank #1 and a VGM Style Score of A. You can see Click here to sign up for a free trial to the Research Wizard today .

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: .

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