As dividend stocks are a great choice for investors looking for portfolio income and steady returns, you may be interested in the top dividend stocks to watch.
But beyond factors like yield and dividend growth, you may want to consider names in this category that are also in the “Green Zone.”
TradeSmith offers investors valuable tools for determining which stocks to watch. A good example is its Health Indicator feature. This comprehensive indicator provides an overall rating of a stock’s current health.
Using this metric, you can quickly find potential opportunities to explore. Broken down into three “zones” (green, yellow, and red), you’ll have a general idea about whether it’s best to be bullish, bearish, or neutral on a particular stock.
As you may have guessed, stocks in the “Green Zone” are performing well, with little indication that the trend is on the verge of shifting.
A stock in the “Yellow Zone” has corrected by more than 50% of its volatility quotient (or VQ), a proprietary TradeSmith metric that helps measure a stock’s risk. When a stock in your portfolio goes from green to yellow, it may be a good time to reassess whether to maintain the position.
Stocks entering the “Red Zone” have corrected by more than their calculated volatility quotient. VQ can be useful when adding stop losses to positions. View any move into the “Red Zone” as a warning sign to exit your position for now.
These three dividend stocks to watch are currently in the “Green Zone.”
Enterprise Products Partners (EPD)
Enterprise Products Partners (NYSE:EPD) has been in the “Green Zone” for over nine months. Shares in the oil and gas pipeline and storage company may be best known for their high dividend yield (7.45%), but the stock has also experienced a solid amount of appreciation (around 11.6%) since the start of the year.
You may think this year’s jump in price for EPD stock is due to the recent spike in oil prices, but remember that, as a midstream company, Enterprise Products Partners generates steady cash flow from its operations, irrespective of movements in spot energy prices.
That may explain why this EPD is one of the few high-yield stocks with a long track record of dividend growth. The company has increased its dividend 24 years in a row. TradeSmith’s volatility quotient for EPD is 16.36%, which makes it a medium-risk stock.
International Business Machines (IBM)
International Business Machines (NYSE:IBM) entered the “Green Zone” just over a month ago. Shares in the tech giant have long been known for being one of the dividend stocks to watch, due to a moderately high yield (4.71%), plus a history of steady dividend increases.
That said, growth has been a big issue with IBM stock, weighing on overall total returns.
Yet while “Big Blue” has traded sideways for the past five years, its multi-year slump may be entering the rearview mirror. Why? Two reasons.
First, IBM is aggressively pursuing opportunities in high-growth areas like hybrid cloud infrastructure and artificial intelligence. This could lead to a growth resurgence.
Second, as RBC Capital’s Matthew Swanson argued last month, as investors realize that IBM is primarily a software and consulting company now, shares have room to re-rate towards a higher valuation. TradeSmith’s volatility quotient for IBM is 15.95%, which makes it a medium-risk stock.
Republic Services (RSG)
Republic Services (NYSE:RSG) has been in the “Green Zone” for more than four months. The waste management company’s shares have performed well in the near term, and could continue to do so over a long time frame. Here’s why.
Between the recession-resistant nature of its business, plus continued efforts to grow the business via “bolt-on” acquisitions, a moderate level of earnings growth is likely to continue. Sell-side analysts forecast earnings will grow by double-digits annually in the coming years. RSG stock stands to rise in tandem with this growth.
Higher earnings also mean the opportunity for dividend increases. RSG has increased its payout 19 years in a row. While shares yield just 1.49% today, continued dividend growth will push this yield considerably higher over time. This puts shares in the dividend stocks to watch category. TradeSmith’s volatility quotient for RSG is 15.09%, which makes it a medium-risk stock.
The TradeSmith Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.