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4 Growth Stocks to Buy with Dividends Over 2.5%

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"Investors have few spare tires left. Think of the image of a car on a bumpy road to an uncertain destination that has already used up its spare tire. The cash reserves of people have been eaten up by the recent market volatility." - Mohamed A. El-Erian

So far 2016 has been a tough year for investors, with muted growth in the Euro zone, continual weakness in China, fluctuating commodity market prices and other global growth concerns being major worries hampering the U.S. stock market. These also restrained the Fed from going for a rate hike. The federal funds rate is therefore left untouched at 0.25% to 0.50% at least for now.

Though the policy makers hinted that they have adopted a cautious stance given the current situation prevailing in the broader economy, plans for a rate hike remain in the cards. Last December, the Fed had planned up to a four quarter-point rise in interest rate for 2016. However, the financial mayhem beyond the borders compelled it to retreat from its plan, and adopt a more steady and meticulous approach. Market pundits now expect two quarter-point rate hikes by the end of the year.

While the global markets are trying hard to make their way out of the woods, domestic investors welcomed the Fed's decision, which to an extent calms the jitters that rose, when discouraging retail sales data for February and a downward revision to January retail sales point to some degree surfaced.

Oil Prices Hampering the Market

Declining oil prices - one of the major reasons that hampered the stock market in 2015 - have been witnessing a steady recovery from the late January lows, and have rallied nearly 45% to around the $40 per barrel mark. The prospects of the oil market remain somewhat bleak but there is a renewed hope for an output freeze that can put the derailed market back on track.

It is being speculated that at next month's meeting in Doha, most of the major oil producing nations will agree to freeze crude production. However, doubts over the degree to which such a move would help reduce the supply glut remained, thereby eventually dragging oil prices southward on Monday.

Wait and Watch Policy or Smart Investing?

Now the most important question that arises is "should you wait for the situation to improve?" We suggest that instead of losing sleep over the uncertainties plaguing the market at the moment and making desperate attempts at gauging the direction, investors should add stocks with high dividend yield and growth potential to their portfolio.

Adding dividend stocks is always a good decision for investors looking for a steady return not only to counter the short-term market challenges but to stay afloat in the long term as well. Moreover, dividend stocks with high growth potential will minimize the risk of your portfolio losing value amid the current scenario.

Adding Growth to Dividend Stocks

Many investors like to look for growth stocks, but this can be very tough to define. There is great debate regarding the best metrics to focus on in this regard, and which may not be really quality indicators of future performance. Fortunately, with the help of our new style score system , we have identified the key statistics to pay close attention to this and thus, estimate which stocks might be the best for growth investors in the near term.

With the help of the Zacks Stock Screener , we have zeroed in on four stocks with solid growth prospects, meaning a Growth Style Score of 'A', and a Zacks Rank #1 (Strong Buy) or 2 (Buy), along with a dividend yield of 2.5% or more.

Our Growth Style Score condenses all the essential metrics from the company's financial statements to get a true sense of the quality and sustainability of its growth. Our research shows that stocks with Growth Style Scores of 'A' or 'B' when combined with a Zacks Rank #1 or #2 offer the best investment opportunities in the growth investing space.

Our Picks

American Eagle Outfitters, Inc.AEO , which operates as a retailer of apparel and accessories, sports a Zacks Rank #1. The company has a dividend yield of 3.1% and a Growth Style Score of 'A'. For the current year, the company's estimated earnings growth rate stands at 12.8% in comparison to the industry growth rate of 6.7%. The company's long-term earnings growth rate is currently pegged at 10%. It has surpassed the Zacks Consensus Estimate in the trailing four quarters with an average earnings surprise of 15.8%.

Mattel, Inc.MAT , which is the world's largest manufacturer of toys, holds a Zacks Rank #2. The company has a dividend yield of 4.7% and a Growth Style Score of 'A'. The company's current-year estimated earnings growth rate is pegged at 8.5% contrasting the industry growth rate of -9.4%. The company has surpassed the Zacks Consensus Estimate in the three of the last four quarters, with an average earnings beat of 31.5%. Mattel's long-term earnings growth rate stands at 12.4%.

Target Corp.TGT which operates as a general merchandise retailer in the U.S., currently carries a Zacks Rank #2. The company has a dividend yield of 2.7% and a Growth Style Score of 'A'. For the current year, the company's estimated earnings growth rate stands at 12.8% in comparison to the industry growth rate of 10%. Its long-term earnings growth rate is pegged at 11.1%. The company has surpassed the Zacks Consensus Estimate in the trailing three out of four quarters with an average earnings surprise of 3.9%.

World Wrestling Entertainment Inc.WWE is an integrated media and entertainment company. It is involved in the sports entertainment business and operates in North America, Latin America, Europe, the Middle East, the Asia Pacific and Africa. The company currently has a Zacks Rank #1, Growth Style Score of 'A' and a dividend yield of 2.7%. The company's estimated earnings growth rate for the current year is pegged at 25% in comparison to the industry growth rate of 2.1%. Also, its long-term earnings growth rate currently stands at 20%.

Bottom Line

We believe investing in these stocks will not disappoint you as these have sound fundamentals. While the impact of uncertainties on the stock market is always difficult to assess, it is the steady income part of which we could be sure to some extent. Moreover, growth associated with these stocks will add further value to your portfolio.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days . Click to get this free report >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

WORLD WRESTLING (WWE): Free Stock Analysis Report

AMER EAGLE OUTF (AEO): Free Stock Analysis Report

TARGET CORP (TGT): Free Stock Analysis Report

MATTEL INC (MAT): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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