One Great Dividend Grower to Buy Today

Plus, how to find more… [TradeSmith Daily]( One Great Dividend Grower to Buy Today By Lucas Downey, Contributing Editor, TradeSmith Daily It’s no secret that the stock market goes up over time. Look at any long-term chart and you’ll see a line trending up and to the right. But there’s a big secret behind that line… One small segment of the market is responsible for nearly half of that performance. And that’s high-quality dividend stocks. A couple weeks ago, I shared [how powerful dividends are for your portfolio](. 41% of the S&P 500’s performance is attributed to dividends since 1930. That’s a huge piece of the stock market pie. If you’re not in quality dividend stocks, you’re missing out on a huge part of the action. So today, I’ll show you which dividend stocks are the best to own. I’ll even single out a top-tier dividend company that’s primed for big upside…and show you exactly how I found it. RECOMMENDED LINK [Could This Tiny Microcap Be the Biggest A.I. Opportunity of the Decade?]( This may be the biggest tech opportunity you’ll see in your lifetime. (HINT: It’s not Google, Microsoft, Nvidia, or other obvious companies that have already run up). [Go HERE for details]( Focus on the Aristocrats At first glance, new investors may be lured into thinking the largest dividend yields are the best. That’d be wrong. A large yield means nothing if the stock doesn’t maintain it. And no dividend is big enough to counter major capital losses. Instead, investors should focus on stocks that continually raise their dividends — think of Dividend Aristocrats, companies with 25+ years of consecutive dividend hikes — as well as stocks that begin issuing a dividend which didn’t before. Check this out… From 1973-2022, $100 invested in dividend growers and initiators turned into $13,061. Those gains trounce the $8,060 from dividend payers that didn’t grow their payouts. Even more incredible, investing in stocks with no change in dividend policy resulted in only $2,441, much less than the equal-weighted S&P 500 Index: Ned Davis Research and Hartford Funds This shows us that not all dividend stocks are created equal. You need to isolate the companies with the ability to sustain and grow their dividend over time. Now that we know that companies which consistently raise their dividends tend to crush the market, how can we go about finding them? 1-Step Method to Find Top Dividend Stocks One easy metric to scan for companies with a strong ability to pay dividends is with the Dividend Payout Ratio (DPR). This ratio is an easy way to learn how much a company is shelling out via dividends relative to its earnings. Firms with high DPRs indicate that a large share of their earnings are dedicated to paying dividends. This can be a problem because if earnings fall, their dividend could be in jeopardy. Conversely, low DPRs suggest ample room for a company to not only continue their dividend payments, but also increase them. For me, I look for companies with DPRs of 50% or less as potential dividend growth targets. This 50% indicates 2 important concepts: - If earnings fall modestly, it shouldn’t impact the dividend. So, there’s a bit of safety here. - If earnings increase, the company will be able to increase the dividend payout. To calculate a company’s dividend payout ratio, simply take the last 12 months of dividends paid and divide it by the last 12 months of earnings per share (EPS). Let’s now do an example of a company screening very well on the Dividend Payout Ratio… RECOMMENDED LINK [This new A.I. tech is a retirement game changer]( A brand-new A.I. algorithm recently came onto the scene that can predict stock prices one month into the future with astonishing accuracy. Imagine if you had this kind of predictive power. It could be a complete retirement game changer. [Click here to get the full story and to see what this algorithm is saying the price of AAPL, NVDA, TSLA will be one month from now](. One Dividend Growth Stock to Grab on Sale A few weeks back, I highlighted how the [consumer staples sector]( has been massively underperforming the market lately. Year-to-date, the dividend-heavy Consumer Staples Select Sector ETF (XLP) is down 8.7% vs the S&P 500’s gain of 14.2%. Most would see this weakness and turn the other way. I think that’s a mistake. Opportunities abound when dividend stocks face pressure. And Dollar General (DG) is the posterchild for stocks under pressure. In 2023, DG is down 54%… an awful performance to say the least. After the company slashed its sales and earnings last week, their full year EPS guidance sank to $7.35/share from $7.70. Generally speaking, it can be a very bad sign when a company guides lower. However, just about all corporations will guide lower at some point in their cycle. It’s important to understand when this setback hits a high-quality stock with the ability to right the ship. Dollar General, a discount merchandise store founded in 1939, is one such high-quality dividend growth story on sale. Even after the earnings cut, their DPR sits at a very healthy level. By dividing the company’s forward dividend payments of $2.36 by their expected earnings of $7.35, the DPR sits at 32.1%: This tells me that not only is their dividend sustainable, it has plenty of room to rise in the years ahead. Based on history, that’s a good bet. Since 2015, the company has regularly raised its payout. This latest rout puts the stock back at levels last seen in 2019. Additionally, the forward yield sits at 2.1%… its highest ever. Considering that the stock is at levels not seen since 2019, when the dividend was half (.29 vs .59) where it is today, at $111 per share, this is a fire sale on a tremendous company: YahooFinance They say beauty is in the eye of the beholder. I agree. And what I see is a beautiful setup! Given the historical dominance of dividend growers, a modest dividend payout ratio, and a rich history of dividend increases, DG looks like a steal. With stocks broadly under pressure, now is the perfect time to be hunting for dividend-growth opportunities like these. One datapoint — the DPR — led us to finding a potential great deal in Dollar General stock. This highlights the power of using data in your investing process. That’s what TradeSmith is all about. And that’s just the tip of the iceberg for how we use data to find great income opportunities. [Mike Burnick’s Ultimate Income]( is the pinnacle of this idea. Mike uses a combination of three options and stock trading strategies to generate reams of income from high-quality, no-nonsense stocks. It’s all about cash flow — [consistent payouts hitting your brokerage account every single week](. If you’re looking for great income opportunities, you can’t do much better than this. [Get the full story here.]( Regards, Lucas Downey, Contributing Editor, TradeSmith Daily Get Instant Access Click to read these free reports and automatically sign up for research throughout the week. [25 Doomed Blue Chip Stocks]( [3 Stocks That Could Triple This Year]( [Download now on the Apple Store]( [Get It On Google Play]( [Customer Support: 866.385.2076](tel:+866-385-2076) | support@tradesmith.com [Request Customer Service](mailto:support@tradesmith.com) ©TradeSmith, LLC. All Rights Reserved. You may not reproduce, modify, copy, sell, publish, distribute, display or otherwise use any portion of the content without the prior written consent of TradeSmith. TradeSmith is not registered as an investment adviser and operates under the publishers’ exemption of the Investment Advisers Act of 1940. The investments and strategies discussed in TradeSmith’s content do not constitute personalized investment advice. 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