Dividend growth strategies target companies with a track record of consistently increasing dividends. This steady growth reflects strong financial discipline offering potential gains from both rising dividend income and capital appreciation.
Hence, investors could consider keeping track of fundamentally sound dividend stocks: Automatic Data Processing, Inc. (ADP), Genuine Parts Company (GPC), and Stanley Black & Decker, Inc. (SWK), especially since there’s a lot happening in the market at the moment.
Inflation pressures are easing as prices decline and fears subside. However, weak employment data and an increase in unemployment to 4.3% have once again raised concerns about the economy’s outlook. Despite these issues, the real GDP expanded by 3% in Q2 2024, and the Fed enacted its much-anticipated rate cut.
Dividend growth stocks provide a consistent and increasing stream of income over time, making them ideal for investors seeking reliable cash flow. Dividend stocks often come from financially stable companies with the potential for long-term growth, offering both dividends and the chance for capital gains amid economic volatility.
Considering these factors, let’s take a look at the fundamentals of the three dividend-paying stocks.
Automatic Data Processing, Inc. (ADP)
ADP provides cloud-based human capital management solutions worldwide. It operates in two segments: Employer Services and Professional Employer Organization (PEO).
ADP’s annualized dividend of $5.60 per share translates to a dividend yield of 2.03% on the current share price. Its four-year average yield is 1.98%. Over the past three and five years, ADP’s dividend payments have grown at CAGRs of 14.6% and 12.2%, respectively.
ADP’s trailing-12-month ROCE of 93.14% is 628.5% higher than the industry average of 12.79%. Also, the stock’s trailing-12-month ROTC and ROTA of 40.75% and 6.90% are 475.2% and 40.1% higher than the industry averages of 7.08% and 4.93%, respectively.
ADP’s total revenues for the fiscal fourth quarter that ended June 30, 2024, increased 6.6% year-over-year to $4.77 billion. Its adjusted net earnings stood at $858.10 million, up 10% from the prior year’s quarter. Also, its adjusted EPS grew 11% year-over-year to $2.09.
Analysts expect ADP’s revenue and EPS for the quarter ending September 30, 2024, to increase 5.7% and 6.6% year-over-year to $4.77 billion and $2.22, respectively. The company surpassed Street EPS estimates in each of the trailing four quarters, which is impressive. Over the past year, the stock has gained 16% to close the last trading session at $277.58.
ADP’s POWR Ratings reflect its outlook. The stock has a B grade for Stability and Quality. It is ranked #17 in the 37-stock B-rated Outsourcing - Business Services industry. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
Beyond what is stated above, we’ve also rated ADP for Value, Growth, Momentum, and Sentiment. Get all ADP ratings here.
Genuine Parts Company (GPC)
GPC distributes automotive replacement parts, as well as industrial parts and materials. It operates in two segments: Automotive Parts Group and Industrial Parts Group segments.
GPC pays an annual dividend of $4, which translates to a yield of 2.92% at the prevailing price levels. Its four-year average dividend yield is 2.56%. The company’s dividend payments have grown at a CAGR of 6.9% over the past three years.
In terms of the trailing-12-month net income margin, GPC’s 5.24% is 14.1% higher than the 4.59% industry average. Likewise, its 28.16% trailing-12-month ROCE is 151% higher than the industry average of 11.22%. Furthermore, the stock’s 12.22% trailing-12-month ROTC is 98.3% higher than the industry average of 6.16%.
GPC’s net sales for the fiscal year, which ended on June 30, 2024, increased 5.9% year-over-year to $5.96 billion. Its gross profit rose 15.6% over the prior-year quarter to $2.18 billion. The company’s adjusted net was reported at $341.56 million, and adjusted earnings per share at $2.44.
GPC’s revenue is expected to increase 2.4% year-over-year to $5.96 billion for the third quarter ending September 2024. Its EPS is expected to be $2.54. The company surpassed its EPS estimates in three of the trailing four quarters, which is promising.
Shares of GPC have gained marginally intraday to close the last trading session at $137.74.
GPC’s POWR Ratings reflect bright prospects. The stock has an overall rating of B, which equates to Buy in our proprietary rating system.
GPC has a B grade for Stability. It is ranked #26 out of 61 stocks in the A-rated Auto Parts industry.
In addition to the POWR Ratings highlighted above, one can access GPC’s ratings for Growth, Value, Sentiment, Momentum, and Quality here.
Stanley Black & Decker, Inc. (SWK)
SWK provides hand tools, power tools, outdoor products, and related accessories in the United States, Canada, other Americas, Europe, and Asia. It operates through the Tools & Outdoor and Industrial segments.
SWK’s annualized dividend of $3.28 per share translates to a dividend yield of 3.07% on the current share price. Its four-year average yield is 2.76%. Its dividend payouts have increased at a CAGR of 4% over the past three years. Also, SWK has paid dividends for 55 consecutive years.
SWK’s trailing-12-month levered FCF margin of 10.26% is 60% higher than the 6.41% industry average.
During the second quarter ended June 29, 2024, SWK’s net sales amounted to $4.02 billion. The company’s non-GAAP gross profit grew 19.4% compared to the same quarter last year, reaching $1.17 billion.
Its adjusted net earnings from continuing operations were $164.50 million, or $1.09 per share, compared to an adjusted net loss from continuing operations of $16.90 million, or $0.11 per share in the prior-year period, respectively.
Analysts expect SWK’s EPS for the quarter ending December 31, 2024, to increase 65.6% year-over-year to $1.04. Its revenue for the quarter ending March 31, 2025, is expected to grow marginally year-over-year to $3.88 billion. It surpassed the consensus EPS estimates in each of the trailing four quarters. SWK’s stock has gained 7.1% over the past month to close the last trading session at $107.53.
SWK’s fundamentals are reflected in its POWR Ratings. SWK has a B grade for Growth. It is ranked #26 out of 57 stocks in the B-rated Home Improvement & Goods industry.
Click here to access the additional SWK ratings (Momentum, Value, Stability, Quality, and Sentiment).
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ADP shares were trading at $275.85 per share on Tuesday afternoon, down $1.73 (-0.62%). Year-to-date, ADP has gained 20.38%, versus a 20.78% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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