Stocks with a strong history of dividend growth ensure steady returns and act as a hedge against any market downturn and economic or political turmoil. These stocks belong to mature companies, which are less susceptible to large swings in the market. Simultaneously, these offer outsized payouts or sizable yields on a regular basis irrespective of the market direction. As a result, these stocks provide greater stability and more scope for capital appreciation as opposed to those that pay high yields.
Additionally, these companies have a sustainable business model, a long track of profitability, rising cash flows, good liquidity, strong balance sheet and some value characteristics. All these superior fundamentals make dividend growth stocks a quality and promising investment for the long term. Further, a history of strong dividend growth indicates that a future hike is likely. This makes the portfolio healthy and safe. Though these stocks have long history of outperformance compared to the broad stock market or any other dividend paying stocks, it does not necessarily mean that they have the highest yields: Huntington Ingalls Industries Inc (HII), Torchmark Corporation (TMK), Scripps Networks Interactive, Inc. (SNI), Citigroup Inc (C) and Southwest Gas Holdings Inc (SWX).
Source: InvestorPlace
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