MW 10 dividend stocks for investors who also want growth

By Philip van Doorn

These companies have attractive dividend yields, and analysts expect them to show high growth rates for revenue and profits through 2026

Investors who want income have an increasing number of options, including exchange-traded funds that feature monthly payouts and varying strategies and market concentrations. But some investors still like to hold some individual stocks of companies that pay dividends within diversified portfolios.

And it is possible to screen dividend stocks to identify companies expected to increase their revenue and earnings rapidly. This way you can pursue long-term growth as you collect dividend income.

For examples of exchange-traded funds whose main goal is to provide high monthly income while making use of covered-call option strategies, you can check out this recent coverage of two energy funds, as well as a closed-end fund with a 10-year performance record that has beaten the return of the S&P 500. You should also take a look at these two high-income equity funds managed by J.P. Morgan.

Getting back to a combined income and growth goal for individual stocks, we screened the S&P Composite 1500 Index XX:SP1500, which is made up of the S&P 500 SPX, the S&P MidCap 400 Index MID and the S&P Small Cap 600 Index SML. Before looking at the screen, take a look at expected compound annual growth rates for the indexes' sales per share and earnings per share over the next two years. The indexes' weighted dividend yields are also shown.

   Sector                Two-year estimated sales CAGR through 2026  Two-year estimated sales EPS through 2026  Dividend yield 
   S&P 500                                                     5.9%                                      12.9%           1.29% 
   S&P MidCap 400                                              4.7%                                      12.4%           1.49% 
   S&P Small Cap 600                                           4.6%                                      19.3%           1.66% 
   S&P Composite 1500                                          5.5%                                      13.0%           1.31% 
                                                                                                               Source: FactSet 

Those expected growth rates are based on consensus estimates among analysts working for brokerage or research firms polled by FactSet, weighted by market capitalization. FactSet adjusts the estimates for companies whose fiscal reporting periods don't match the calendar.

The S&P 500 has the highest two-year estimated sales growth CAGR through 2026, while the S&P Small Cap 600 has the highest expected EPS CAGR - a whopping 19.3%, reflecting an expected decline in funding costs for smaller companies as interest rates come down.

The high EPS growth expectations across the board also incorporate expectations for improved interest spreads for banks. Their funding costs (mainly deposits) have already declined significantly since the Federal Reserve began to cut short-term interest rates in September. Meanwhile, the yield on 5-year U.S. Treasury notes BX:TMUBMUSD05Y increased to 4.05% early Monday from 3.45% on Sept. 17 - the day before the Fed began its short-term rate-cutting cycle. At the same time, the 10-year U.S. Treasury yield BX:TMUBMUSD10Y climbed to 4.23% from 3.66% on Sept. 17.

With loan rates holding up or increasing while deposit costs decline, it is not a surprise to see banks topping the screen when it is sorted by expected revenue growth.

Dividend stock screen

Our screen began with the components of the S&P Composite 1500, and we narrowed the list to companies that:

-- Have dividend yields of at least 3% but less than 10%. The idea of this cap is that a high dividend yield is a warning. In this market, a dividend yield of 10% on an individual stock is likely to mean the share price is under pressure because investors are afraid the company's financial performance is weak enough that a dividend cut may be coming.

-- Are covered by at least five analysts polled by FactSet. This way we have a decent-size group from which consensus estimates are derived.

-- Have projected two-year sales CAGR of at least 11.8% through 2026 - double that of the S&P 500, which has the highest projected sales growth rate in the index table above.

-- Have projected two-year EPS CAGR of at least 19.3% - matching that of the S&P Small Cap 600, which has the highest projected EPS growth rate in the index table above.

10 companies made the list. There is no perfect way to sort the list. We have sorted it by projected revenue CAGR:

   Company                          Ticker    Dividend yield  Two-year estimated sales CAGR through 2026  Two-year estimated EPS CAGR through 2026 
   Atlantic Union Bankshares Corp.  AUB                3.81%                                       38.1%                                     20.9% 
   KeyCorp                          KEY                4.73%                                       30.8%                                     23.0% 
   Dime Community Bancshares Inc.   DCOM               3.23%                                       29.2%                                     63.4% 
   Coterra Energy Inc.              CTRA               3.15%                                       23.6%                                     47.9% 
   Moelis & Co. Class A             MC                 3.68%                                       20.1%                                     42.4% 
   CareTrust REIT Inc.              CTRE               4.48%                                       15.6%                                     38.5% 
   Acadia Realty Trust              AKR                3.47%                                       14.2%                                     36.5% 
   First American Financial Corp.   FAF                3.29%                                       13.3%                                    120.7% 
   Atlas Energy Solutions Inc.      AESI               5.16%                                       12.1%                                     59.3% 
   Allegiant Travel Co.             ALGT               3.27%                                       11.6%                                     96.4% 
                                                                                                                                   Source: FactSet 

Click on the tickers for more about each company.

Read: Tomi Kilgore's guide to the wealth of information available on the MarketWatch quote page

This type of stock screen is only a snapshot. It might serve as a useful tool to begin your own research. You should form your own opinion about a company's ability to remain competitive for the next decade before investing in an individual stock.

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-Philip van Doorn

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March 03, 2025 11:36 ET (16:36 GMT)

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