Everyday readers of Zacks.com are offered four new stocks that fit each of the four main styles of investing: Aggressive Growth, Growth & Income, Momentum and Value.
The Education section of Zacks.com offers a plethora of detailed articles and helpful information on each style of investing. Extremely helpful are the guides for each style.
Because I write about Growth and Income stocks and in light the Fed’s near-zero rate policy, I want to focus on growth stocks that also reward shareholders with dividends that are well above current interest rate levels.
However, links are provided to guides for all four investment styles at the end of the article.
What to Expect with Growth and Income
Generally, a Growth and Income play will have healthy balance sheets, consistent dividend payments, quality products and services and experienced management teams. Usually Growth and Income companies are industry leaders, displaying steady earnings growth.
Companies that continually exhibit stable earnings growth, more than anything else, are ones that should hit the radar screens of Growth & Income investors. After all, companies exhibiting all of the characteristics mentioned earlier should have no problem producing a steady stream of profit growth. Analysts will subsequently grow more optimistic about the future earnings potential of the company and adjust their estimates up accordingly.
Growth & income investors get a dual benefit from following earnings estimate revisions. First, positive estimate revisions help investors buy shares in the companies with the best chances to outperform the market. Second, positive estimate revisions provide the easiest means to monitor the health of companies, providing a rather clear signal when the time has come to abandon ship. Companies experiencing upward estimate revisions will generally enjoy positive momentum going forward. Rarely will a stock suffer a significant price decline in the face of improving fundamentals. Add it all up and it’s clear that Growth and Income investors should only buy shares in companies enjoying upward earnings estimate revisions. The best way to harness this phenomenon is through the Zacks Rank.
Solid Growth and Income picks should carry a Zacks Rank of #1 (Strong Buy) or #2 (Buy). Check out the Guide to Growth and Income investing for more detailed information on this style of investing and the important role that the Zacks Rank plays in screening for Growth and Income stocks.
I did a little screening of my own using the Research Wizard and discovered several stocks that offer a dividend yield of more than 2%. I didn’t stop there. I also made sure that the fundamentals were sold and signaling growth. The Research Wizard helped me find nearly 30 companies that posses the following attributes:
*A Zacks Rank #2 or better
*A return on equity (ROE) of better than 10%
*The company’s earnings per share expected to grow by more than 10% over the next 3 – 5 years.
3 Solid Growth and Income Picks
I highlighted 3 of the stocks to give you an idea of the kind of fundamentals these Growth and Income plays offer. Try the Research Wizard for yourself and discover many more winning stocks.
Avon Products (AVP), the world’s largest direct seller, markets to women in more than 100 countries through 5.8 million independent Avon Sales Representatives. Avon’s product line includes beauty products as well as fashion and home products.
The company recently declared a quarterly dividend of 21 cents per share, which translates into an industry-leading yield of 2.4%. The dividend is payable December 1 to shareholders of record November 20.
In late October, Avon reported third-quarter earnings of 42 cents per share, exceeding the Zacks Consensus Estimate by 8%. Revenue slipped 4% year-over-year but was up 7% on a local-currency basis.
The company is seeing bullish earnings estimates. The full-year Zacks Consensus Estimate of $1.72 per share is up 6 cents over the past 60 days.
For 2010, analysts polled by Zacks are projecting earnings of $2.20 per share, versus the 2 months-ago level of $2.10.
Polaris Industries, Inc. (PII) designs, engineers, manufactures and markets off-road vehicles (ORVs), including all-terrain vehicles (ATVs) and the Polaris RANGER(TM), snowmobiles and Victory motorcycles for recreational and utility use and has recently introduced a new on-road electric powered neighborhood vehicle.
The company recently declared a quarterly dividend of 39 cents per share, which translates into an industry-leading yield of 3.5%. The dividend was paid out on November 16.
In mid-October, the company announced third-quarter earnings of 94 cents per share, which was below the previous year’s $1.13 but 12% ahead of the Zacks Consensus Estimate.
Polaris upped its full-year earnings guidance to a range of $2.92 to $2.98 per share, versus the previous range of $2.70 to $2.90 per share.
Analysts polled by Zacks hiked 2009 earnings estimates to $2.96 per share from the 2 months-ago level of $2.78.
For 2010, the Zacks Consensus Estimate of $3.22 was increased from $3.05 over the past 60 days.
Tupperware Brands Corporation (TUP) sell design-centric preparation, storage and serving solutions for the kitchen and home through the Tupperware brand as well as beauty and personal care products through its Avroy Shlain, BeautiControl, Fulller, NaturCare, Nutrimetrics, and Nuvo brands.
Analysts polled by Zacks are upbeat on TUP’s earnings. The full-year Zacks Consensus Estimate of $2.90 per share is up from $2.66 over the past 60 days.
For 2010, analysts are calling for earnings of $3.44, versus the 2 months-ago level of $3.05.
The company reported third-quarter earnings of 54 cents per share, topping the Zacks Consensus Estimate by 29% and surpassing the previous year’s 47 cents. Sales were up 9% in local currency.
Tupperware declared a dividend of 25 cents, representing a 14% hike. Tupperware stated that the dividend is payable on January 4 to shareholders of record on December 4. The company pays an industry-leading dividend yield of 2%.
Additional Resources
Zacks Guide to Aggressive Growth
Zacks Guide to Growth and Income
Zacks Guide to Momentum
Zacks Guide to Value
Research Wizard – Use this sophisticated tool to screen for your own Growth and Income picks. Or, create new strategies and backtest them.
Zacks Custom Screener – Use this free tool to create your own screens.
Alex Kolb is the Growth & Income Stock Strategist for Zacks.com. He also writes the popular daily commentary column for the ZacksElite.com service. Zacks Investment Research
