3 Stocks to Buy for Strong Dividend Growth

It’s easy to understand why dividends are so cherished among investors, as they provide a passive income stream, help limit the impact of drawdowns in other positions, and allow for maximum returns through dividend reinvestment.

And, of course, a company’s ability to consistently pay and increase dividend payouts reflects a stable and healthy financial position. In addition, dividend boosts help send a positive message surrounding the long-term picture of the company, instilling confidence it can withstand near-term uncertainties or challenges.

Interestingly enough, three companies – Vistra VST, American Homes 4 Rent AMH, and Masco MAS – have all grown their dividend payouts nicely over the years. Further, all three sport a favorable Zacks Rank, indicating optimism among analysts.

For those seeking dividend-growers, let’s take a closer look at each.

Vistra Corp.

Vistra is a holding company that engages in the provision of electricity and power generation. The stock sports the highly-coveted Zacks Rank #1 (Strong Buy), with earnings expectations creeping higher across nearly all timeframes.

VST shares yield a solid 2.6% annually, with a payout ratio of 56% of the company’s earnings. The company has upped its dividend payout an impressive ten times over the last five years, translating to a 14% five-year annualized dividend growth rate.

The company has significant growth expectations, with Zacks Consensus Estimates suggesting 200% higher earnings on nearly 50% higher sales in its current year. The growth is slated to continue, as estimates allude to a further 40% earnings bump on 7% improved sales in FY24.

Vistra posted results nicely above expectations in its latest release, causing shares to see bullish activity post-earnings. VST exceeded the Zacks Consensus EPS Estimate by more than 25% and reported revenue 15% ahead of expectations.

American Homes 4 Rent

American Homes 4 Rent, a current Zacks Rank #2 (Buy), is an internally managed real estate investment trust focused on acquiring, renovating, leasing, and operating single-family homes as rental properties. The company has seen modest positive earnings revisions across multiple timeframes.

AMH shares pay 2.4% annually, with a payout ratio of 55% of earnings. Reflecting a notable commitment to shareholders, the company sports a sizable 46% five-year annualized dividend growth rate.

The company is expected to witness modest growth, with estimates suggesting a 7% earnings bump in its current year and an additional 6% in FY24. Revenue growth is also apparent, forecasted to see improvements of 7.5% and 6% in FY23 and FY24, respectively.

The company’s revenue has remained steady.

Masco Corp.

Masco, a current Zacks Rank #1 (Strong Buy), manufactures, sells, and installs home improvement and building products. Analysts have taken their earnings expectations higher, with the revisions trend particularly notable for its current and next fiscal years.

The company has posted strong quarterly releases lately, exceeding the Zacks Consensus EPS Estimate by more than 20% in back-to-back releases and snapping a streak of negative surprises. In its latest release in late July, Masco posted a 24% EPS beat and delivered revenue 2% ahead of expectations.

MAS shares currently yield 1.9% annually, nicely above the respective Zacks – Building Products industry average. While the present yield may be a tad underwhelming, the company’s 28% five-year annualized dividend growth rate picks up the slack.

Bottom Line

Everybody loves dividends. After all, who doesn’t enjoy getting paid?

Dividends bring many major perks for investors, primarily a passive income stream.

And for those looking to get paid, all three companies above – Vistra VST, American Homes 4 Rent AMH, and Masco MAS – could be great considerations.

All three have grown their payouts nicely over the years and sport favorable Zacks Ranks, with the latter indicating optimism among analysts.
Masco Corporation (MAS): Free Stock Analysis Report

American Homes 4 Rent (AMH): Free Stock Analysis Report

Vistra Corp. (VST): Free Stock Analysis Report

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Zacks Investment Research

This article originally appeared on Zacks

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