If this is the beginning of a broader market rally, many short-term investors may shift away from dividend stocks. After a year or more of playing defense, it makes sense that risk-tolerant traders and investors will want to consider equities with more upside.

But, there’s still a case for solid dividend stocks in your portfolio. These companies aren’t going to be on anyone’s high-growth stock list, but many of these stocks still offer annual earnings growth that outpaces the interest rates offered by long-term Treasury bills. For mature companies that means robust cash flow, which in turn means dividend increases.

Earnings growth is also one of the best predictors of future stock price gains. Many of these stocks are trading at attractive valuations that give them plenty of upside heading into 2024.

And several of these companies are in line to raise their dividends during the next round of earnings. Here are three evergreen dividend stocks to buy for growth as well as income.

Constellation Brands (STZ)
Constellation Brands (NYSE:STZ) falls in the consumer discretionary sector. This is a sector that’s fallen out of favor with investors as consumers tighten their belts and trim their budgets.

But it’s also a sin stock. And sin stocks tend to perform well in bull or bear markets. In fact, the defensive nature of these companies leads to consistent demand regardless of the health of the economy, even during recessions.

Specific to Constellation Brands, the company generates five times the sales per SKU of the two other top beer suppliers. And Constellation is home to two of the most popular beer brands in Modelo and Corona.

Despite a solid earnings report in early October, STZ stock is still well off its 52-week high and is down 10% in the last three months. However, with projections of 12% earnings growth in the next 12 months, there’s good reason to believe the stock may have found a base of support around $230. Plus, Constellation has been aggressively increasing its dividend in the last two years. And sometime early next year, investors are likely to be rewarded with a dividend increase.

Coca-Cola (KO)
Coca-Cola (NYSE:KO) is another dividend stock that offers investors a compelling combination of growth and value. Coke isn’t a stock typically associated with strong growth. As evidence of that, KO stock is up only 13% in the past five years.

However, KO stock is up 7% in the last month despite the broader market being under pressure. This is likely a response to a broader sell-off in the stock on concerns about multiple threats including inflation and weight loss drugs.

But a strong earnings report should put those concerns to bed. And with the stock still down 10% in 2023, there’s room for Coke’s stock to move higher. Especially when the company guided higher for both revenue and earnings. Revenue is now projected to grow 10% to 11% in the next 12 months. Earnings are expected to grow by 7% to 8%.

Plus, long-time dividend investors in KO stock know that the Dividend King is ready for another dividend increase. The last dividend increase was approximately 5% on earnings growth of 7%. That suggests there may be an even higher dividend increase in store for KO shareholders.

Norfolk Southern (NSC)
Like many transportation stocks, Norfolk Southern (NYSE:NSC) has been beaten down this year. NSC stock is down 21% in 2023. The company’s last two earnings reports show declining year-over-year revenue and earnings.

The derailment in East Palestine, Ohio earlier this year hasn’t helped the company’s profile. However, in the last month, the railroad delivered a piece of good news by announcing it had completed the “intensive” part of its environmental remediation efforts in East Palestine. The company has already committed over $96.5 million to the affected area.

That will allow investors to focus on what will likely be an upcoming dividend increase. Forecasts are for the company to grow earnings by 9% in the next 12 months. That’s in line with the 11-cent per share increase shareholders received last year.

— Chris Markoch

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Source: Investor Place