Though rising yields have dampened the appeal for dividend investing, a niche corner of this space is still in vogue. This is none other than the dividend growth strategy. Stocks with a strong history of dividend growth year over year form a healthy portfolio with greater scope of capital appreciation as opposed to simple dividend paying stocks or those that pays high yields. Dividend growth stocks generally act as a hedge against economic or political uncertainty as these belong to mature companies, which are less susceptible to large swings in the market 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 broader stock market or any other dividend-paying stock: FedEx Corporation (FDX), AXIS Capital Holdings Limited (AXS), EnerSys (ENS), Campbell Soup Company (CPB), Southwest Gas Corporation (SWX) and Dick’s Sporting Goods Inc (DKS).
Source: InvestorPlace
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