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5 Dividend Growth Stocks to Beat Market Volatility

The year 2022 has been roiled by huge volatility and uncertainty, which have raised the appeal of dividend investing. Dividend stocks are major sources of consistent income for investors to create wealth when returns from the equity market are at risk even though these do not offer dramatic price appreciation.

In fact, stocks with a strong history of year-over-year dividend growth form a healthy portfolio with a greater scope of capital appreciation as opposed to simple dividend-paying stocks or those that have high yields. We have selected five dividend growth stocks — The Coca-Cola Company KO, General Dynamics Corporation GD, AstraZeneca plc AZN, Boise Cascade BCC, and Insperity Inc. NSP — that could be compelling picks amid market volatility.

Why Dividend Growth?

Stocks that have a strong history of dividend growth belong to mature companies, which are less susceptible to large swings in the market, and 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 dividend increase is likely in the future.

Moreover, a history of dividend growth year over year leads to a healthy portfolio with a greater scope of capital appreciation than simple dividend-paying stocks or those with high yields. 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 also 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 revenues.

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) and 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 over 7,700 stocks to just 17.

Here are the five of the 17 stocks that fit the bill:

Georgia-based Coca-Cola, a beverage company, manufactures, markets, and sells various nonalcoholic beverages worldwide. The company provides sparkling soft drinks; flavored and enhanced water, and sports drinks; juice, dairy, and plant–based beverages; tea and coffee; and energy drinks. Coca-Cola has an expected earnings growth rate of 6.03% for this year and delivered a four-quarter average earnings surprise of 9.85%.

Coca-Cola has a Zacks Rank #2 and a Growth Score of B. You can see the complete list of today’s Zacks #1 Rank stocks here.

Virginia-based General Dynamics is engaged in mission-critical information systems and technologies; land and expeditionary combat vehicles, armaments and munitions; shipbuilding and marine systems; and business aviation. It has an expected earnings growth of  5.28% and delivered an average four-quarter earnings surprise of 2.47%.

General Dynamics has a Zacks Rank #2 and a Growth Score of B.

United Kingdom-based AstraZeneca is one of the largest biopharmaceutical companies in the world. The company has an expected earnings growth rate of 24.91% for this year and delivered a four-quarter average earnings surprise of 3.88%.

AstraZeneca has a Zacks Rank #2 and a Growth Score of B.

Idaho-based Boise Cascade operates as a wood products manufacturer and building materials distributor. It has seen a solid earnings estimate revision of 42 cents for this year over the past month and has an expected earnings growth rate of 13.97%.

Boise Cascade has a Zacks Rank #2 and a Growth Score of B.

Texas-based Insperity provides an array of human resources and business solutions designed to improve business performance. The company has an expected earnings growth rate of 25.32% for this year.

Insperity has a Zacks Rank #2 and Growth Score of B.

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.

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: https://www.zacks.com/performance.


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General Dynamics Corporation (GD) : Free Stock Analysis Report
 
AstraZeneca PLC (AZN) : Free Stock Analysis Report
 
CocaCola Company The (KO) : Free Stock Analysis Report
 
Insperity, Inc. (NSP) : Free Stock Analysis Report
 
Boise Cascade, L.L.C. (BCC) : Free Stock Analysis Report
 
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