While investors avoid stocks that do not have juicy yields, it is true that these low-yield stocks have a solid history of dividend growth that lead to outperformance. This is because investors can enjoy rising current income while awaiting capital appreciation even in a volatile market.

Inside The Dividend Growth Strategy

Stocks that have a strong history of dividend growth generally act as a hedge against economic or political uncertainty as these belong to mature companies, which are less susceptible to large swings in the market while simultaneously offer downside protection with their consistent increase in payouts.

These stocks have superior fundamentals as opposed to their traditional dividend counterparts such as a sustainable business model, a long track record of profitability, rising cash flows, good liquidity, strong balance sheet and some value characteristics. They have a history of outperformance over the long term but not necessarily high dividend yields. All these makes dividend growth a quality and promising investment metric for the long term.

Further, a history of strong dividend growth indicates that dividend increase in the future is likely. This makes the portfolio healthy and safe. Though these stocks have a long history of outperformance compared with the broader stock market or any other dividend paying stock, it does not necessarily mean that they have the highest yields.

As a result, picking dividend growth stocks appear as winning strategies when some other parameters are also included.

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 revenue.

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 less than M-industry indicates that the stock is undervalued in that industry and that an investor needs to pay less for better cash flow generated by the company.

52-Week Price Change greater than S&P 500 (Market Weight): This ensures that the stock appreciated more than the S&P 500 over the past one year.

Top Zacks Rank: Stocks having a Zacks Rank #1 (Strong Buy) and 2 (Buy) generally outperform their peers in all types of market environment.

VGM Style Score of B or better: This is simply a weighted combination of Value, Growth and Momentum. This when combined with a Zacks Rank #1 or #2 offers the best upside potential.

Here are five of the 13 stocks that fit the bill:

Juniper Networks Inc. (JNPR - Free Report) : This California-based company is a provider of internet infrastructure solutions that enable internet service providers and other telecommunications service providers to meet demand resulting from the rapid growth of the internet. The company has seen positive earnings estimate revision of three cents over the past 90 days for this year and has an expected earnings growth rate of 6.82%. It has a VGM Style Score of B and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Cummins Inc. (CMI - Free Report) : This Indiana-based company is one of the leading worldwide designers and manufacturers of diesel engines. It has seen solid earnings estimate revision of 41 cents for this year over the past three months, and delivered an average positive earnings surprise of 11.13% in the past four quarters. It has a Zacks Rank #2 and a VGM Style Score of B.

Lam Research Corporation (LRCX - Free Report) : This California-based company designs, manufactures, markets and services semiconductor processing equipment used in the fabrication of integrated circuits. It has seen impressive earnings estimate revision of $1.85 over the past 90 days for this fiscal year with an expected earnings growth rate of 27.82%. The stock has a Zacks Rank #1 and a VGM Style Score of B.

GATX Corporation (GATX - Free Report) : This Illinois-based company is the leading global railcar lessor specializing in railcar and locomotive operating leasing, aircraft operating leasing, information technology leasing, and venture finance for customers in diverse industrial sectors worldwide. It has seen positive earnings estimate revision by a couple of cents for this year over the past three months, and delivered an average positive earnings surprise of 32.77% in the past four quarters. It has a Zacks Rank #2 and a VGM Style Score of B.

Hasbro Inc. (HAS - Free Report) : This Rhode Island-based company is a worldwide leader in children's and family leisure time and entertainment products and services, including the design, manufacture and marketing of games and toys ranging from traditional to high-tech. It has seen solid earnings estimate revision of 15 cents for this year over the past three months, with an expected earnings growth rate of 13.27%. The stock has a Zacks Rank #2 and a VGM Style Score of A.