Bet on These 3 Dividend Growth Stocks Amid AI Spending Fears
Major U.S. stock indices slipped yesterday, pulling Wall Street lower on June 23, as a sharp sell-off in semiconductor and artificial intelligence (AI) stocks overshadowed a drop in oil prices. The dismal performance reflected mounting investor anxiety over costly, debt-funded AI spending, coupled with a persistently hawkish Federal Reserve stance.
Against this backdrop, risk-averse investors may find that steady dividend-growth stocks offer a more balanced mix of income and stability than high-beta growth plays at this stage.
These dividend-growth stocks boast a consistent track record of raising payouts, underscoring the balance-sheet strength and cash-flow resilience required to navigate a period in which the traditional growth narrative is being reassessed.
Stocks with a strong history of year-over-year dividend growth can help build a resilient portfolio with greater potential for capital appreciation compared to simple dividend-paying or high-yield stocks.
We have selected three dividend growth stocks — Dell TechnologiesDELL, Hewlett PackardHPE and Taiwan SemiconductorTSM — that could be solid choices for your portfolio.
Why Is Dividend Growth Better?
Stocks with a strong history of dividend growth are typically associated with mature companies that are less prone to sharp market swings, allowing them to serve as a hedge against economic or political uncertainty, as well as broader market volatility. Their steadily rising payouts provide a measure of downside protection.
These companies are generally backed by solid fundamentals, making them attractive long-term dividend-growth investments. Key strengths include durable business models, consistent profitability, expanding cash flows, healthy liquidity, strong balance sheets and attractive valuations.
A consistent history of dividend growth underscores the potential for continued growth ahead.
Although these stocks do not necessarily have the highest yields, they have outperformed the broader stock market or any other dividend-paying stock for an extended period.
As a result, selecting dividend-growth stocks appears to be a winning strategy when other key parameters are taken into account.
5-Year Historical Dividend Growth Greater Than Zero: This selects stocks with a solid dividend growth history.
5-Year Historical Sales Growth Greater Than Zero: This represents stocks with a strong record of growing revenues.
5-Year Historical EPS Growth Greater Than Zero: This represents stocks with a solid earnings growth history.
Next 3-5 Year EPS Growth Rate Greater Than Zero: This represents the rate at which a company’s earnings are expected to grow. Improving earnings should help companies sustain dividend payments.
Price/Cash Flow Less Than M-Industry: A ratio lower than the industry median indicates that a stock is undervalued within its industry, meaning an investor would pay less for the company’s cash flow.
52-Week Price Change Greater Than S&P 500 (Market Weight): This ensures that a stock has appreciated more than the S&P 500 over the past year.
Top Zacks Rank: Stocks with a Zacks Rank #1 (Strong Buy) or 2 (Buy) generally outperform their peers in all types of market environments.
Growth Score of B or better: Our research shows that stocks with a Growth Score of A or B, when combined with a Zacks Rank #1 or 2, offer the best upside potential.
These few criteria alone narrowed the universe from more than 7,700 stocks to just three.
Here are the three stocks that fit the bill:
Texas-based Dell Technologies is a leading provider of servers, storage, and persona computers. The company’s IT solutions support customers in traditional infrastructure and multi-cloud environments. The Zacks Consensus Estimate for DELL’s fiscal 2026 revenues suggests a year-over-year improvement of 47.4%. The stock boasts a long-term (three-to-five years) earnings growth rate of 26.40%. It has an annual dividend yield of 0.59%.
DELL currently sports a Zacks Rank #1 and has a Growth Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.
Headquartered in Texas, Hewlett Packard is an enterprise-facing hardware and service business that focuses on servers, supercomputers, storage, networking and cloud services. The Zacks Consensus Estimate for HPE’s fiscal 2026 revenues suggests a year-over-year improvement of 31.30%. The stock boasts a long-term earnings growth rate of 32% and has an annual dividend yield of 1.17%.
HPE currently sports a Zacks Rank #1 and a Growth Score of B.
Taiwan-based Taiwan Semiconductor is the world's first dedicated semiconductor foundry. It manufactures integrated circuits for its customers based on their proprietary IC designs using its advanced production processes. The Zacks Consensus Estimate for TSM’s 2026 revenues suggests a year-over-year improvement of 32.2%. The stock boasts a long-term earnings growth rate of 22.40% and has an annual dividend yield of 0.69%.
TSM currently carries a Zacks Rank #2 and a Growth Score of B.
7 Best Stocks for the Next 30 Days
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Since 1988, the full list has beaten the market more than 2X over with an average gain of +23.7% per year. So be sure to give these hand picked 7 your immediate attention.
See them now >>This article originally published on Zacks Investment Research (zacks.com).
