Wall Street has been exhibiting wild swings, driven by growing uncertainty around the new U.S. administration’s economic tariffs. These tariffs are expected to drive up consumer prices, thus curbing spending and weighing on the U.S. economy. In such a scenario, investors have become defensive and shifted their focus to products that provide stability and safety in a rocky market. As a result, the appeal for dividend stocks has risen. 

Though these stocks do not offer dramatic price appreciation, they tend to outperform in a choppy market and can reduce the volatility of a portfolio. In fact, stocks with a strong history of year-over-year dividend growth form a healthy portfolio with a greater scope of capital appreciation, as opposed to simple dividend-paying stocks or those with high yields. Two stocks — Broadcom Inc. AVGO and Primoris Services PRIM — seem solid choices in this regard.

Why Dividend Growth Strategy?

Stocks that have a strong history of dividend growth belong to mature companies less susceptible to large swings in the market and thus act as a hedge against economic or political uncertainty as well as stock market volatility. At the same time, these offer downside protection with their consistent increase in payouts.

These stocks have superior fundamentals that make dividend growth a quality and promising investment for the long term. These include a sustainable business model, a long track of profitability, rising cash flows, good liquidity, a strong balance sheet and some value characteristics. A history of strong dividend growth indicates that a dividend increase is likely in the future.

Although these stocks do not necessarily have the highest yields, they have outperformed for a longer period than the broader stock market or any other dividend-paying stock.

As a result, picking dividend growth stocks appears as a winning strategy when some other parameters are also included.

5-Year Historical Dividend Growth Greater Than Zero: This selects stocks with a solid dividend growth history.

5-Year Historical Sales Growth Greater Than Zero: This represents stocks with a strong record of revenue growth.

5-Year Historical EPS Growth Greater Than Zero: This represents stocks with a solid earnings growth history.

Next 3-5 Year EPS Growth Rate Greater Than Zero: This represents the rate at which a company’s earnings are expected to grow. Improving earnings should help companies sustain dividend payments.

Price/Cash Flow Less Than M-Industry: A ratio less than M-industry indicates that a stock is undervalued in that industry, and an investor needs to pay less for better cash flow generated by a company.

52-Week Price Change Greater Than S&P 500 (Market Weight): This ensures that a stock has appreciated more than the S&P 500 over the past year.

Top Zacks Rank: Stocks having a Zacks Rank #1 (Strong Buy) and 2 (Buy) generally outperform their peers in every market environment.

Growth Score of B or Better: Our research shows that stocks with a Growth Score of A or B, when combined with a Zacks Rank #1 or 2, offer the best upside potential.

These few criteria have narrowed down the universe from more than 7,700 stocks to just 3.

Here are two of the three stocks that fit the bill:

California-based Broadcom is a premier designer, developer and global supplier of a broad range of semiconductor devices focused on complex digital and mixed-signal complementary metal oxide semiconductor-based devices and analog III-V based products. The stock saw positive earnings estimate revision of 4 cents for the fiscal year (ending October 2025) over the past 30 days and has an expected earnings growth rate of 35.5%. 

Broadcom has a Zacks Rank #1 and a Growth Score of B. You can see the complete list of today’s Zacks #1 Rank stocks here.

Texas-based Primoris Services operates as one of the largest specialty contractors and infrastructure companies in the United States. The company provides a wide range of construction, fabrication, maintenance, replacement, water and wastewater, and engineering services to major public utilities, petrochemical companies, energy companies, municipalities, and other customers. PRIM saw a positive earnings estimate revision of 4 cents over the past month for this year and has an estimated earnings growth rate of 9.8%. 

Primoris Services has a Zacks Rank #2 and a Growth Score of A at present. 

You can get the rest of the stock on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and test them first before taking the investment plunge.

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Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance.

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Broadcom Inc. (AVGO) : Free Stock Analysis Report

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This article originally published on Zacks Investment Research (zacks.com).

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