2 Growth Dividend Stocks Destined to Continue to Outperform in 2023

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  • Uncertainty over the Federal Reserve’s rate outlook, growing recession fears and persistent inflation will continue to dictate investor sentiment through the end of 2023.
  • In the current market environment, I continue to favor profitable blue chip companies with growing dividends and high free cash flow.
  • That’s why I recommend buying shares of Hormel Foods and UnitedHealth Group.
  • Looking for more blue chip stock ideas to add to your portfolio? InvestingPro members enjoy exclusive access to our research tools and data. Learn more »

High-quality dividend-paying stocks have been among the best performers in the market over the past year, as they tend to provide investors with a strong income stream regardless of economic conditions.

Therefore, using the InvestingPro screenerI took a methodical approach to sifting through the more than 7,500 stocks listed on the NYSE and the to build a small watch list of established companies that show strong profitability, healthy cash flow and years of strong growth. their dividends.

I focused on companies with a market cap of $10 billion or more.

InvestingPro Screener

I then looked for companies whose InvestingPro rating for « earnings » and « cash flow » was either « A » or « B ». Investing Pro’s valuation criteria is an advanced stock ranking system that takes into account more than 100 parameters relating to growth, profitability, cash flow and company valuation, and which then compares the companies to each other. The best performing companies on these metrics are the healthiest.

I then narrowed my choice to companies whose dividends have been increasing for at least ten years. Names with an Investing Pro « fair value » greater than or equal to 10% have been added to my watchlist. The estimate of fair value is determined based on several valuation models, including price-to-earnings, price-to-sell and multiple price-to-book ratios.

Once the criteria were applied, I only retained 26 companies.

InvestingPro Screener

Source: Investing Pro

Of these, Hormel Foods (NYSE:) and UnitedHealth Group (NYSE:) are the two companies that stood out to me the most.

Hormel Foods

  • Performance since the beginning of the year: -12.7
  • Increase in the fair value of the Investing Pro share: +16.5%
  • Dividend growth: 57 years

Despite the recent downtrend in its stock, Investing Pro has identified Hormel Foods – which is one of the world’s leading food processing companies – to deliver significant long-term shareholder value in the months ahead.

Demonstrating the strength and resilience of his business, Hormel scores a near-perfect 4/5 on Investing Pro’s « profitability health. » The Pro Profitability Score is determined by ranking the company on more than 100 factors against other companies in the consumer staples industry.

HRL Financial Health

Source: Investing Pro

The Austin, Minnesota-based packaged food maker has proven over time that it can weather a downturn in the economy and continue to pay higher cash dividends through its business model cost-effective and reliable that has successfully weathered many storms in the past.

In fact, Hormel has increased its annual dividend for 57 consecutive years, and with a payout ratio below 60% for the current fiscal year, the dividend king will likely announce its 58th consecutive annual increase in 2023. The shares are currently paying 2 .77%, which is significantly higher than the implied yield of 1.56% on the .

Based on its valuation metrics, I think Hormel stock might be undervalued by some investors who are too focused on the company’s near-term challenges.

HRL Daily Chart

Shares of the food giant are down 12.7% year-to-date due to the negative impact of persistently high inflation and supply chain headwinds on its core business. Additionally, a recent outbreak of avian flu has wreaked havoc on the Jennie-O turkey segment.

However, in my opinion, these are only temporary headwinds that should dissipate in the coming months.

At a price below $40, HRL exhibits an extreme discount according to quantitative models ofInvesting Prowhich forecast a 16.5% rise in Hormel stock from current levels over the next 12 months.

HRL Fair Value

Source: Investing Pro

Hormel, which is present in more than 80 countries, is best known for its production of a wide range of packaged and chilled foods. Some of the company’s most iconic brands include SPAM, Planters, Skippy, Columbus Craft Meats and Jennie-O.

UnitedHealth Group

  • Year-to-date performance: -4.8
  • Increase in fair value according to the Investing Pro method: +10.6%
  • Dividend growth: 13 years

UnitedHealth Group is the largest US health insurer and one of the largest healthcare conglomerates in the world, with a market capitalization of nearly $500 billion.

Stocks have soared in recent weeks, with UNH stock posting a 10% gain since hitting its low in mid-March ($457.59), a level last seen in June 2022.

UNH Daily Chart

According to data fromInvesting ProUnitedHealth is benefiting from a number of headwinds that should see its stock continue to rise in the coming months, including a spotless balance sheet and strong growth in free cash flow yields, which should allow it to rise its dividend payments.

UNH Company Profile, Financial Health

Source: Investing Pro

It’s no surprise that the healthcare giant has increased its annual dividend for 13 consecutive years, underscoring its outstanding track record of returning cash to investors.

UNH Dividend Data

Source: Investing Pro

Sign of the good performance of its activities in the current context, UnitedHealth published last week results above expectations for the first quarter, thanks to the good performance of its health services segment Optum and the significant increase in the number of Medicare Advantage members.

The diversified healthcare company posted adjusted earnings of $6.26 per share in the first quarter, up 14% from $5.49 in the same period last year. Revenue rose about 15% year-over-year to a record $91.9 billion, marking the fifth consecutive quarter of double-digit sales growth.

The encouraging results prompted the healthcare giant to revise its full-year 2023 earnings forecast upwards from $24.40-24.90 per share to a range of $24.50. at $25.00 per share.

« Our strong company-wide growth this quarter is a direct result of our colleagues’ unwavering commitment to bringing more health services to more people and connecting consumers with better access to health care. high quality and affordable,” CEO Andrew Witty said in the earnings release.

According to InvestingPro, the Minnetonka, Minn.-based health care conglomerate has exceeded Wall Street earnings estimates for 40 straight quarters since the second quarter of 2013.

UNH Fair Value

Source: Investing Pro

All things considered, I think UNH stocks are worth adding to your portfolio as they are still attractively priced and should offer an additional 10.6% upside from Tuesday’s close as indicates it Investing Pro.


Disclosure : As of this writing, I am long on the S&P 500, and on the Nasdaq 100 via SPDRS&P 500 ETF (SPY), and the Invesco QQQ Trust ETF (QQQ). I’m also long on the TechnologySelect Sector SPDR ETF (XLK). I regularly rebalance my portfolio of individual stocks and ETFs on the basis of a permanent assessment of the risks related to the macroeconomic environment and the financial situation of companies.

The opinions expressed in this article are the author’s alone and should not be considered investment advice.


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