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Four Dividend Stocks Meet Tough Earnings Test

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A faster growth rate is usually good news for a stock, even a dividend stock where steadiness is the usual focus. A screen of IBD's Dividend Leaders found only four stocks that met a stringent three-pronged test for such stocks: Earnings per share estimates for 2015-16 are above the company's three- and five-year growth rates; recent revisions have risen recently for this year and next year; and the EPS growth rate is expected to accelerate from 2015 through 2016.

McDonald's ( MCD ) shows three- and five-year earnings growth rates of minus 6% and 0%, respectively. However, the Street expects 2015 EPS growth to check in at 1% and then jump to 9% in 2016. The 9% growth would be the fastest since 2011. The dividend yield is 3.1% vs. 2.53% for the Dow Jones industrial average.

Kimberly-Clark ( KMB ), a household products provider, sports three- and five-year EPS growth rates of 3% and 4%. Analysts see 5% for 2015 and 7% for 2016. The dividend yield is 2.8%.

Maxim Integrated Products ( MXIM ), a semiconductor maker, carries three- and five-year earnings growth rates of minus 3% and 1% respectively. The Street pegs growth at 13% in fiscal 2016 ending in June and then 22% in fiscal 2017. The dividend yield is 3.2%.

Reynolds American ( RAI ), a cigarette maker, shows three- and five-year EPS growth rates of 8% each. The Street expects 16% growth this year and 17% growth in 2016. The dividend yield is 3.2%.

Which of these dividend stocks are likely to increase the payout in 2016?

McDonald's and Kimberly-Clark are Dividend Aristocrats, which means that they have raised their dividend every year for at least 25 years. So they look like sure candidates.

Maxim Integrated has increased its dividend payout in each of the past five years.

Reynolds American has increased its dividend each year since its 2004 merger with Brown & Williamson Tobacco.

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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