While most investors are familiar with dividend investing, which provides income over time, some are not familiar with dividend growth investing. This is a strategy that finds dividend stocks that continuously grow their dividends. These stocks provide income and the potential for strong returns due to their growth attributes.

A company that can continuously increase their dividends is doing something right since they have the additional cash flow to increase payments. This means the companies are growing their revenues, increasing their profits, and increasing their cash flow. If a company’s executive board is concerned about the future, they will not increase dividends.

Dividend growth shows a sign of confidence by insiders in the company that it is headed in the right direction. When we combine dividend growth with our proprietary POWR Ratings system, we can find stocks that offer the best of both worlds: consistent income and a higher chance of solid price gains. 

That’s why I am highlighting the following four buy-rated dividend growth stocks below: Allstate Corporation (ALL), Huntington Ingalls Industries, Inc. (HII), T. Rowe Price Group, Inc. (TROW), and Dick’s Sporting Goods Inc. (DKS). 

Allstate Corporation (ALL)

ALL is one of the largest U.S. property-casualty insurers and the largest publicly traded personal lines insurance company, with about 10% of the personal lines market. While personal auto represents the largest percentage of revenue, the company also offers homeowners insurance and other insurance products.

The company’s auto insurance segment saw high profits from the pandemic due to a massive decrease in miles driven. In addition, the company has been increasing prices on many of its policies, which has also led to improved profitability. Revenue is expected to continue growing due to strategic initiatives management has undertaken, such as product enhancements and business changes that focus on a high return on equity.

ALL’s dividend has increased 50% over the past year and at an average of 19.7% over the past five years. It has an overall grade of B, which translates into a Buy rating in our POWR Ratings system. The company has a Growth Grade of A, which isn’t surprising, with revenue and earnings expected to rise over 9% in the March ending quarter.

ALL also has a Value Grade of B as it is currently trading at a very low valuation. Its trailing P/E is 6.79, and its forward P/E is 9.33. We also grade ALL based on Momentum, Stability, Sentiment, and Quality. You can find those grades here. ALL is ranked #5 in the Insurance – Property & Casualty industry. You can find other top stocks in that industry by clicking here.

Huntington Ingalls Industries, Inc. (HII) 

HII was created from the spin-off of Northrop Grumman’s (NOC) shipbuilding business. The company is now the largest independent military shipbuilder. It supplies and builds amphibious assault and expeditionary ships. It also designs, builds, and refuels nuclear-powered aircraft carriers and designs and builds nuclear-powered submarines for the U.S. Navy.

The company has benefited from an increase in U.S. Navy spending for the Pacific. The area has been the epicenter of hostile maritime activity as China expands its territorial waters. The shipbuilding business has a strong outlook due to the fiscal 2021 defense budget inclusion of a spending plan for $32.3 billion. HII’s huge backlog count also bodes for the company.

The company has increased its dividend by an average of 17.9% over the past five years. It had an overall grade of B or a Buy in our POWR Ratings system. It has a Value Grade of B with a trailing P/E of 11.92 and a forward P/E of 16.72. HII also has a Quality Grade of B, indicating a strong balance sheet. The company had $512 million on the books as of the end of last year, compared with no short-term debt.

To access the rest of HII’s grades (Growth, Momentum, Stability, and Sentiment), click here. HII is ranked #7 in the Air/Defense Services industry. For more top stocks in that industry, make sure to visit this link.

Rowe Price Group, Inc. (TROW) 

TROW is an investment firm that offers a broad range of mutual funds. The company’s revenue is derived from fees on client assets, so it grows through new client assets and asset growth in client accounts. The company has grown significantly over the past ten years, going from $391 billion in assets under management to $1.4 trillion in 2020.

TROW has 33 straight years of annual dividend increases. Over the past year, the company increased its dividend by 20%. Over the past five years, TROW has increased its dividend by an average of 14.9%. The company has seen organic growth driven by strong investment performance and investments in products & distribution. Plus, the company has a stickier set of clients than its peers, as two-thirds of its assets are in retirement-based accounts.

Its target-date retirement funds are likely to continue drawing new assets due to favorable demographic trends. The company has an overall grade of B, which translates into a Buy rating in our POWR Ratings service. It has a Stability Grade of B, which means both the company’s growth and its stock performance have been steady over time. 

TROW also has a Quality Grade of B due to its healthy balance sheet. The company currently has a sky-high current ratio of 11.1, which indicates it has enough liquidly to handle short-term obligations. To gain access to the rest of TROW’s grades (Growth, Value, Momentum, and Sentiment), click here. TROW is ranked #9 in the Asset Management industry. To find other top stocks in that industry, click here.  

Dick’s Sporting Goods Inc (DKS) 

DKS retails athletic apparel, footwear, and equipment for sports. It operates about 728 stores under its own name and another 120 specialty stores under Golf Galaxy and Field & Stream names. The stores offer a broad assortment of brand and private label sporting goods apparel, footwear, and equipment. The company also operates e-commerce sites, including the youth sports site Team Sports HQ.

With the warm months coming up, the store should see an increase in both foot traffic and online orders. In the sporting goods retail space, DKS has created a sustainable competitive advantage due to investments to bridge the gap between the physical storefront and its online site. It’s also driving traffic due to its higher-margin private label offerings. The company increased its dividend by 16% over the past year and at an average of 19.1% over the past five years.

DKS is rated a Buy with a grade of B in our POWR Ratings service. The company has a Growth Grade of B as earnings rose 63.5% over the past year and are forecasted to jump 158% year over year in the quarter ending in April. The company also has a Momentum Grade of A, indicating bullish price momentum over the near, mid, and long term.

We also provide Value, Stability, Sentiment, and Quality grades for DKS, which you can find here. DKS is ranked #14 in the A-rated Athletics & Recreation industry. You can find other great stocks in that industry by clicking here.

Want More Great Investing Ideas?

Top 10 Growth Stocks

How to Ride the NEW Stock Bubble?

5 WINNING Stocks Chart Patterns

Unlock the POWR in Your Portfolio!

ALL shares were unchanged in after-hours trading Wednesday. Year-to-date, ALL has gained 6.65%, versus a 9.11% rise in the benchmark S&P 500 index during the same period.

About the Author: David Cohne

David Cohne has 20 years of experience as an investment analyst and writer. Prior to StockNews, David spent eleven years as a consultant providing outsourced investment research and content to financial services companies, hedge funds, and online publications. David enjoys researching and writing about stocks and the markets. He takes a fundamental quantitative approach in evaluating stocks for readers. More...

More Resources for the Stocks in this Article