Wall Street has been shaky in recent weeks due to a weakening Chinese economy and fears of higher rates for a longer-than-expected period. Against such a backdrop, investors are increasingly exploring strategies that will help them to protect their portfolios from downside risk. And nothing seems better than the strategy of dividend investing.<\/p>\n
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 \u2014 Caterpillar Inc.<\/strong> CAT, KB Home<\/strong> KBH, Walmart Inc.<\/strong> WMT, Dr. Reddy\u2019s Laboratories<\/strong> RDY and FedEx Corporation<\/strong> FDX \u2014 that could be solid choices amid market volatility.<\/p>\n 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.<\/p>\n 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.<\/p>\n 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.<\/p>\n As a result, picking dividend growth stocks appears as a winning strategy when some other parameters are also included.<\/p>\n 5-Year Historical Dividend Growth greater than zero:<\/strong> This selects stocks with a solid dividend growth history.<\/p>\n 5-Year Historical Sales Growth greater than zero:<\/strong> This represents stocks with a strong record of growing revenues.<\/p>\n 5-Year Historical EPS Growth greater than zero: <\/strong>This represents stocks with a solid earnings growth history.<\/p>\n Next 3-5 Year EPS Growth Rate greater than zero: <\/strong>This represents the rate at which a company\u2019s earnings are expected to grow. Improving earnings should help companies sustain dividend payments.<\/p>\n Price\/Cash Flow less than M-Industry:<\/strong> 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.<\/p>\n 52-Week Price Change greater than S&P 500 (Market Weight):<\/strong> This ensures that the stock appreciated more than the S&P 500 over the past year.<\/p>\n Top Zacks Rank:<\/strong> Stocks having a Zacks Rank #1 (Strong Buy) and 2 (Buy) generally outperform their peers in all types of market environment.<\/p>\n Growth Score<\/strong> of B or better:<\/strong> 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.<\/p>\n Just these few criteria narrowed down the universe from over 7,700 stocks to just 16.<\/p>\n Here are five of the 16 stocks that fit the bill:<\/p>\n Illinois-based Caterpillar<\/strong> is the largest global construction and mining equipment manufacturer. The company saw a solid earnings estimate revision of 21 cents over the past 30 days for this year and has an estimated growth rate of 43.2%.<\/p>\n Caterpillar has a Zacks Rank #1 and a Growth Score of B.<\/p>\n California-based KB Home<\/strong> is a well-known homebuilder in the United States and one of the largest in the state. The company saw a solid earnings estimate revision of 14 cents over the past 60 days for the fiscal year ending November 2023. It delivered an average earnings surprise of 20.66% for the past four quarters.<\/p>\n KB Home has a Zacks Rank #2 and a Growth Score of A.<\/p>\n Arkansas-based Walmart <\/strong>has evolved from being just a traditional brick-and-mortar retailer into an omnichannel player. It is engaged in the operation of retail, wholesale and other units worldwide. The company saw a positive earnings estimate revision of 19 cents over the past 30 days for the fiscal year ending January 2024. It has an estimated growth rate of 2.07%.<\/p>\n Presently, WMT has a Zacks Rank #2 and a Growth Score of A.<\/p>\n India-based Dr. Reddy\u2019s Laboratories<\/strong> is an integrated global pharmaceutical company engaged in providing affordable and innovative medicines since 1984. The company saw a solid earnings estimate revision of 5 cents over the past seven days for the fiscal year ending March 2024. It has an estimated earnings growth rate of 14.85%.<\/p>\n At present, RDY has a Zacks Rank #1 and a Growth Score of B.<\/p>\n Tennessee-based FedEx <\/strong>is the leader in global express delivery services. It provides a broad portfolio of transportation, e-commerce and business services through companies competing collectively, operating independently and managing collaboratively under the FedEx brand. FedEx has seen upward earnings estimate revision of 7 cents over the past seven days for the fiscal year (ending May 2024) and has an estimated earnings growth rate of 16.1%.<\/p>\n FDX has a Zacks Rank #2 and a Growth Score of B. Caterpillar Inc. (CAT): Free Stock Analysis Report<\/p>\n Walmart Inc. (WMT): Free Stock Analysis Report<\/p>\n FedEx Corporation (FDX): Free Stock Analysis Report<\/p>\n KB Home (KBH): Free Stock Analysis Report<\/p>\n To read this article on Zacks.com click here.<\/p>\n Zacks Investment Research<\/p>\n This article originally appeared on Zacks<\/i><\/p>\n Sponsored: Find a Qualified Financial Advisor<\/b><\/p>\n Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to 3 fiduciary financial advisors in your area in 5 minutes. Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests. If you’re ready to be matched with local advisors that can help you achieve your financial goals, get started now.<\/p>\nPeeping Into the Strategy<\/h3>\n
\nDr. Reddy’s Laboratories Ltd (RDY): Free Stock Analysis Report<\/p>\n