This is undoubtedly a good time to invest in dividend stocks that can provide a steady source of income along with fair capital appreciation. The current outlook of the stock market is uncertain due to the continued increase in coronavirus cases and the potential negative impact on the economy.

However, given these uncertainties, it’s important to ensure the sustainability of a company’s dividend payment before betting on it. So, companies that have grown their dividend payouts over time-based on their fundamental strength could be ideal choices.

While many companies failed to sustain their dividend payments this year due to the impact of the pandemic on their businesses, some companies continued rewarding shareholders with steady or even rising dividends. These stocks have also delivered capital gains as evident from the Vanguard High Dividend Yield ETF’s (VYM) 31.1% gain since March.

Automatic Data Processing, Inc. (ADP), The Travelers Companies, Inc. (TRV), Eaton Vance Corporation (EV), and Olin Corporation (OLN) are great dividend stocks with strong balance sheets and proven business models. These companies have a high dividend yield and have been growing their dividend payout over time.

Automatic Data Processing, Inc. (ADP)

ADP offers several kinds of business outsourcing and HCM solutions. The company’s services include talent management, human resource management, payroll services, benefits administration, retirement services, and tax, insurance services, payment solutions, and related services. ADP’s stock has gained 49.2% since hitting its low in mid-March.

The company has been distributing a $0.91 dividend per share for the last four quarters, which is an increase of 15.2% from the earlier dividend amount. The company’s dividend payout has a five-year CAGR of 13.22%. The current dividend yield is 2.24% while the four-year average dividend yield is 2.1%.

During the first quarter fiscal 2021, the company’s employer services new business bookings increased by 2% year-over-year despite challenges posed by the spread of the coronavirus. Net earnings also increased by 3% during the same period.

ADP is expected to witness revenue growth of 6.5% in 2022. The company’s EPS is estimated to grow by 12.4% in 2022 and at a rate of 11% per annum over the next five years.

How does ADP stack up for the POWR Ratings?

A for Trade Grade

B for Buy & Hold Grade

A for Peer Grade

B for Industry Rank

B for Overall POWR Rating

The stock is also ranked #5 out of 57 stocks in the Outsourcing – Business Services industry.

The Travelers Companies, Inc. (TRV)

TRV specializes in providing insurance for personal and commercial property along with casualty insurance products to government units, businesses, and individuals in the United States and internationally. The company operates in the bond and specialty insurance, business and international insurance, and personal insurance areas. TRV’s stock has gained 42.5% from its mid-March low.

The company has been distributing a $0.85 dividend per share for the last three quarters, which is an increase of 4.9% from the earlier dividend amount. The company’s dividend payout has a five-year CAGR of 8.5%. The current dividend yield is 2.67% while the four-year average dividend yield is 2.41%.

The company has recently launched IndustryEdge for Professional Services. This specialty insurance offering covers a range of eventualities such as data breaches, theft, lawsuits, and other industry-specific risks. This new insurance offering specifically helps professionals such as engineers, accountants, lawyers, and more. The company is now providing ergonomic assessments through on-site and virtual checks based on artificial intelligence. This new feature will help business customers reduce costs associated with workplace injuries.

TRV’s revenue is expected to grow by 2.8% for the quarter ending December 2020, and 5.1% in 2021. The company’s EPS is estimated to grow 19.5% in 2021 and at a rate of 3.9% per annum over the next five years.

It’s no surprise that TRV is rated a “Buy” in our POWR Ratings system, with a grade of “A” in Trade Grade and Peer Grade. In the 25-stock Insurance – Life industry, it is ranked #3.

Eaton Vance Corporation (EV)

EV specializes in the creation, management, and marketing of investment funds in the United States. The company provides investment solutions to institutions as well as retail investors. The stock has gained 33.1% so far this year.

The company has been distributing a $0.375 dividend per share for the last five quarters, which is an increase of 7.1% from the earlier dividend amount. The company’s dividend payout has a five-year CAGR of 9.4%. The current dividend yield is 2.41% while the four-year average dividend yield is 2.95%.

The company has signed an agreement with Morgan Stanley (MS) to be acquired at an equity value of $7 billion. This move will help Morgan Stanley become a leader in three scalable segments of institutional securities, wealth management, and investment management. Further, Parametric, which is an associate of Eaton Vance, has launched Parametric Custom Core Fixed Income which will provide investors with a selection of fixed income markets.

EV’s revenue is expected to grow by 2.3% in 2020 and 5.5% in 2021. The company’s EPS is estimated to grow by 5.4% in 2021 and at a rate of 4.3% per annum over the next five years.

EV’s strong fundamentals are reflected in its POWR Ratings. It has a “Strong Buy” rating with an “A” in Trade Grade, Buy & Hold Grade, and Peer Grade. In the 45-stock Asset Management industry, it is ranked #2.

Olin Corporation (OLN)

OLN produces a range of chemicals such as caustic soda, hydrochloric acid, bleach products, potassium hydroxide, and more. The company is also a leading manufacturer of ammunition in the United States. OLN’s stock has gained 17.6% so far this year.

The company has been distributing a $0.20 dividend per share for more than the last five years. The company has consecutively declared a quarterly dividend of 376 times. The current dividend yield is 3.94% while the four-year average dividend yield is 3.84%.

The company has recently announced the partial redemption of senior notes valuing $14.6 billion, which should increase the operating liquidity of the company as well as reduce the interest burden.

OLN’s revenue is expected to grow 4.4% for the quarter ended in December 2020 and 12.8% in 2021. The company’s EPS is estimated to grow 95.8% in 2021 and at a rate of 2.3% per annum over the next five years.

It’s no surprise that OLN is rated a “Buy” in our POWR Ratings system, with a grade of “A” in Trade Grade and a “B” in Buy & Hold Grade, and Peer Grade. In the 69-stock Chemicals industry, it is ranked #17. 

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ADP shares were trading at $164.93 per share on Friday afternoon, up $2.22 (+1.36%). Year-to-date, ADP has declined -1.44%, versus a 10.16% rise in the benchmark S&P 500 index during the same period.

About the Author: Aaryaman Aashind

Aaryaman is an accomplished journalist that’s passionate about providing in-depth insights about investing and personal finance. Recently he has been focused on the stock market and he specializes in evaluating high-growth stocks. More...

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