Jefferies likes these dividend-growing stocks for 2024

Investors searching for income could be well-rewarded by turning to dividend-growing stocks, according to Jefferies. Macro indicators such as the expectation of falling inflation, slowing economic growth and easing commodity prices suggest a move toward dividend growers, according to Desh Peramunetilleke, the firm’s global head of quantitative strategy. He also likes high-quality-yield stocks in this environment. “Consensus expects USA dividend growth to accelerate from 3.9% for 2023 to 6.2% for 2024, along with positive revisions,” Peramunetilleke wrote in a note Wednesday. “Most sectors except energy and autos are expected to grow dividends, led by media and semis.” There has also been a drop in stock buybacks, which has boosted the free-cash-flow cover for companies, he noted. “With earnings growth returns, [the] US can grow dividends again, without impacting the [free cash flow] cover,” Peramunetilleke said. Jefferies defines dividend growers as companies with a dividend-per-share compound annual growth rate of more than 5% from 2019 to 2023 and forecast for 2024 and 2025. In addition, they have a strong track record, with dividend-per-share growth greater than 5% in at least four out of the five years. Dividends were also never cut more than 5% in any of the past years. Lastly, they have positive free-cash-flow conversion, based on the last five years’ average, and a dividend sustainability star rating of three or more. The firm filtered for companies with a market cap of $5 billion or more and a dividend yield above 1.5%. Here are 10 names that made the list. JPMorgan Chase , which has a 2.3% 12-month forward dividend yield, is the largest name on the list. In October, the bank raised its dividend to $1.05 per share from $1.00. That said, the bank in January noted its fourth-quarter profit fell after paying a $2.9 billion fee tied to the regional banking crisis. Shares are up nearly 13% year to date. AbbVie also made the list with a 12-month forward dividend of 3.5%. Shares are up more than 15% this year, after losing 6.6% in 2023. The biotech company has been facing declining sales for its autoimmune drug Humina, which lost exclusivity last year. However, it has two newer immunology drugs, Skyrizi and Rinvoq, which it hopes will help offset those losses. AbbVie also recently closed its $10 billion deal to buy cancer drugmaker ImmunoGen. In December, it announced it would buy neuroscience drugmaker Cerevel Therapeutics for about $8.7 billion. In addition, the company will be getting a new CEO. Longtime executive Robert Michael is set to become the company’s new chief executive effective July 1. McDonald’s , which has a 2.4% 12-month forward dividend, also made the cut. The fast-food giant reported a fourth-quarter earnings beat in February. However, its revenue missed expectations due to boycotts in the Middle East after its Israeli licensee offered discounts for soldiers. The stock has lost 6% year to date.