5 Top-Ranked Dividend Growth Stocks Worth Your Portfolio

The U.S. stock market has been struggling this year as high inflation, soaring yields, Fed’s policy tightening and Russia’s invasion in Ukraine continue to weigh on investor sentiment. Against this backdrop, the appeal for dividend investing has been in vogue. Though the strategy doesn’t offer dramatic price appreciation, it is a major source of consistent income for investors in any type of market.

Honing in on 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 — H&R Block Inc. HRB, Boise Cascade BCC, Broadcom Inc. AVGO, Carriage Services CSV and Sempra Energy SRE — that could be compelling picks.

Inside the Dividend Growth 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 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 appear as winning strategies 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 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 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 one year.

Top Zacks Rank: Stocks having a Zacks Rank #1 (Strong Buy) and 2 (Buy) generally outperform their peers in all types of market environment.

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 13.

Here are five of the 13 stocks that fit the bill:

Missouri-based H&R Block is a leading provider of tax preparation services. The company provides assisted income tax return preparation, do-it-yourself tax solutions and other products and services associated with income tax return preparation in the United States, Canada and Australia. H&R Block saw a solid earnings estimate revision of 48 cents over the past 30 days for the fiscal year (ending June 2022) and delivered an average earnings surprise of 21.04% in the past four quarters.  

H&R Block has a Zacks Rank #1 and Growth Score of B. You can see the complete list of today’s Zacks #1 Rank stocks here.

Idaho-based Boise Cascade operates as a wood products manufacturer and building materials distributor. The company manufactures engineered wood products, plywood, lumber and particleboard and distributes wood products, such as decking, EWP, lumber, panel, particleboard and MDF products. Boise Cascade has seen solid earnings estimate revision by $1.71 over the past month for this year, with an expected modest earnings growth rate of 2.6%.  

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

California-based Broadcom is a premier designer, developer and global supplier of a broad range of semiconductor devices focused on complex digital and mixed-signal complementary metal oxide semiconductor-based devices and analog III-V based products. The stock saw solid earnings estimate revision of $1.29 for the fiscal year (ending October 2022) over the past 30 days and has an expected earnings growth rate of 32%.

Broadcom has a Zacks Rank #2 and Growth Score of A.

Texas-based Carriage Services is a leading provider of death care services and products in the United States. It provides a complete range of services relating to funerals, burials and cremations, including the use of funeral homes and motor vehicles, the performance of cemetery interment services and the management and maintenance of cemetery grounds. Carriage Services delivered an average earnings surprise of 17.40% for the past four quarters and has an expected earnings growth rate of 19.21%.

Carriage Services carries a Zacks Rank #2 and has a Growth Score of B.

Southern California-based Sempra Energy is an energy services holding company involved in the sale, distribution, storage and transportation of electricity and natural gas. The stock saw a positive earnings estimate revision of a penny for this year over the past 30 days and has an expected earnings growth rate of 0.6%.

Sempra Energy carries a Zacks Rank #2 and has a 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.

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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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Sempra Energy (SRE) : Free Stock Analysis Report
 
H&R Block, Inc. (HRB) : Free Stock Analysis Report
 
Broadcom Inc. (AVGO) : Free Stock Analysis Report
 
Carriage Services, Inc. (CSV) : Free Stock Analysis Report
 
Boise Cascade, L.L.C. (BCC) : Free Stock Analysis Report
 
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