In this article, we take a look at 10 high growth low dividend stocks to buy.
Low dividend stocks are stocks that don’t pay that much of a dividend.
Many companies that are profitable and have excess capital pay a dividend as a way to return capital to shareholders. Although not always, those companies tend to pay their dividends every quarter. When times are good and profits rise, many dividend stocks increase their dividends. When times are uncertain or profits decline, many dividend stocks cut their dividends or suspend them all together.
By having a low dividend, companies would have more capital to invest in growth operations or for M&A than similar companies with higher dividends per share.
High Growth Companies
High growth companies have different definitions for different people. For this article, we define high growth as a company where analysts expect the company to grow its EPS by an average annual rate of at least 10% over the next 5 years.
What is considered high growth can vary depending on where the economy is in terms of the economic cycle.
If the economy is in the expansionary phase, more companies might have higher expected average annual EPS growth rates of 10% or more over the next 5 years than if the economy is beginning to contract or if the economic growth is expected to slow considerably.
If the economy is in its absolute trough, however, there is a chance that more companies can grow their earnings per share faster as the base EPS would be an easier comparable to expand upon.
Where the economy is in the current economic cycle is uncertain.
The U.S. economy currently is fairly strong as unemployment is low and the economy is still expanding. Nevertheless, the Federal Reserve has raised interest rates considerably and the U.S. central bank is expected to raise interest rates even further this year. If the Federal Reserve raises interest rates too much, many economists think there could be an economic slowdown or even a recession.
As such, there is arguably more uncertainty over the future than there is normally as what the Federal Reserve does depends on decision makers and economic data. Given the market is uncertain, it could be a good idea for long term investors to own a well diverisified portfolio of leading stocks across many different sectors.
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Methodology
For our list of 10 High Growth Low Dividend Stocks to Buy, we chose 10 stocks with competitive advantages that had an EPS Next 5 year ratios of over 10% and dividend yields of less than 1.5%.
We ranked the stocks based on their EPS next 5 year ratio.
EPS Next 5 Year Ratio is the estimated average annual EPS growth rate in the next 5 years.
Since it is an estimate, the EPS Next 5 Year Ratio can change from time to time depending on economic developments, company specific developments, and analyst views.
For those of you interested, check out 10 High Growth Low Debt Stocks to Buy.
10 High Growth Low Dividend Stocks to Buy
10. Costco Wholesale Corporation (NASDAQ:COST)
EPS Next 5 Year Ratio: 10.40%
Dividend Yield as of 2/20: 0.71%
Costco Wholesale Corporation (NASDAQ:COST) is one of the largest retailers in the world with LTM sales of $226.7 billion as of November 20, 2022. Despite the high inflation, Costco Wholesale Corporation (NASDAQ:COST)’s sales are growing as the company’s sales rose 6.9% year over year to $16.84 billion for the month of January.
In January, Costco Wholesale Corporation (NASDAQ:COST)’s board of directors authorized a common stock repurchase program of up to $4 billion that expires January 2027 that replaces the company’s existing repurchase program. As of 2/20, the company has a dividend yield of 0.71% and analysts expect Costco Wholesale Corporation (NASDAQ:COST) to increase its annual EPS by an average rate of 10.4% a year over the next 5 years.
Alongside The Charles Schwab Corporation (NYSE:SCHW), Mastercard Incorporated (NYSE:MA), and Interactive Brokers Group, Inc. (NASDAQ:IBKR), Costco Wholesale Corporation (NASDAQ:COST) is a low dividend stock that’s expected to grow its EPS at a fairly high rate on average over the next 5 years.
9. Dollar General Corporation (NYSE:DG)
EPS Next 5 Year Ratio: 10.85%
Dividend Yield as of 2/20: 0.97%
Dollar General Corporation (NYSE:DG) is a leading discount retailer that has faced some headwinds given below consensus 2023 guidance. As a result, the stock has declined 7.48% year to date despite the stronger broader market. Nevertheless, analysts do see Dollar General Corporation (NYSE:DG) increasing its annual EPS by an average of 10.85% a year over the next 5 years, ranking the stock #9 on our list of 10 High Growth Low Dividend Stocks to Buy. Dollar General Corporation (NYSE:DG) also has a dividend yield of 0.97% as of 2/20.
8. Waste Connections, Inc. (NYSE:WCN)
EPS Next 5 Year Ratio: 11.21%
Dividend Yield as of 2/20: 0.75%
Waste Connections, Inc. (NYSE:WCN) is a waste management company with operations in the United States and Canada that analysts expect will increase its EPS by an average rate of 11.21% a year over the next 5 years.
As of February 20, the company has a P/E ratio of 42.06 and a forward P/E ratio of 28.04, indicating that the market has priced in much of the expected growth. Nevertheless, Waste Connections, Inc. (NYSE:WCN) has a great quality business in the long term if it maintains its market share. For the fourth quarter, Waste Connections, Inc. (NYSE:WCN) reported adjusted EPS of $0.89 on sales of $1.87 billion versus the consensus of $0.88 on sales of $1.85 billion. For FY2023, the company has an outlook of sales of $8.05 billion versus the consensus of $8 billion. Waste Connections, Inc. (NYSE:WCN) also has a dividend yield of 0.75% as of 2/20.
7. Microsoft Corporation (NASDAQ:MSFT)
EPS Next 5 Year Ratio: 11.77%
Dividend Yield as of 2/20: 1.05%
Microsoft Corporation (NASDAQ:MSFT) is a software giant that has an EPS next 5 year ratio of 11.77% and a dividend yield of 1.05%. In terms of profits, Microsoft Corporation (NASDAQ:MSFT) could benefit if its search engine Bing captures more market share in the future from Google. In terms of Bing, Microsoft Corporation (NASDAQ:MSFT) is reportedly in talks with various advertisers over Bing AI ad plans that might allow paid links within responses to search results. Although the Bing AI makes mistakes, the search engine offers more functionality than it did before.
6. MSCI Inc. (NYSE:MSCI)
EPS Next 5 Year Ratio: 12.74%
Dividend Yield as of 2/20: 1.01%
MSCI Inc. (NYSE:MSCI) is a leading financial data company that ranks #6 on our list of 10 High Growth Low Dividend Stocks to Buy given analysts expect the company to grow its EPS by an average of 12.74% a year for the next 5 years. For the fourth quarter, the company had adjusted EPS of $2.84 on sales of $576.2 million versus the consensus of $2.76 on revenue of $568.46 million. For full year 2022, the company’s operating sales rose 10% year over year to $2.249 billion and adjusted EPS by 15.1% year over year to $11.45.
MSCI Inc. (NYSE:MSCI) CEO Henry Fernandez said, “Despite a global bear market and historically volatile market conditions, MSCI delivered strong performance for the year with Adjusted EPS growth of 15.1% and a record full year retention rate of 95.2%. Among other highlights, we achieved our ninth consecutive year of double-digit subscription run rate growth in Index. Meanwhile, our full-year Climate results across all product lines included 79.6% run rate growth and 97.8% retention rate. Climate remains a significant opportunity and area of keen focus for MSCI.”
Like MSCI Inc. (NYSE:MSCI), The Charles Schwab Corporation (NYSE:SCHW), Mastercard Incorporated (NYSE:MA), and Interactive Brokers Group, Inc. (NASDAQ:IBKR) are low dividend stocks that are expected to grow their EPS at a fairly fast rate on average over the next 5 years.
5. S&P Global Inc. (NYSE:SPGI)
EPS Next 5 Year Ratio: 13.10%
Dividend Yield as of 2/20: 1%
S&P Global Inc. (NYSE:SPGI) is a leading financial data firm with a dividend yield of 1% and a forward P/E ratio of 25.09 as of 2/20. One reason for the fairly premium forward P/E ratio is that analysts expect S&P Global Inc. (NYSE:SPGI) to grow its EPS by an average of 13.1% a year over the next 5 years. For the fourth quarter, S&P Global Inc. (NYSE:SPGI) exceeded analyst estimates for adjusted EPS and sales as the company reported adjusted EPS of $2.54 on sales of $2.94 billion versus the consensus of $2.48 on revenue of $2.88 billion. For FY23, S&P Global Inc. (NYSE:SPGI) sees adjusted EPS of $12.35-$12.55 versus the consensus of $12.44.
4. Visa Inc. (NYSE:V)
EPS Next 5 Year Ratio: 15.48%
Dividend Yield as of 2/20: 0.81%
Visa Inc. (NYSE:V) is a payments leader that is very profitable. For its fiscal full year 2022, Visa Inc. (NYSE:V) had adjusted net income of $16 billion or $7.50 per share and the company’s net sales rose 22% year over year to $29.3 billion. In the fourth quarter, the company’s board of directors increased the quarterly cash dividend by 20% to $0.45 per share and authorized a new $12 billion share repurchase program. As a result, Visa Inc. (NYSE:V) has a dividend yield of 0.81% as of 2/20.
In terms of the future, analysts see Visa Inc. (NYSE:V) growing its EPS by an average rate of 15.48% a year for the next 5 years. While the CFPB proposed a rule to curb excessive credit card late fees in February 1, the stock didn’t decline very much and it is uncertain to what extent it will affect Visa Inc. (NYSE:V).
3. The Charles Schwab Corporation (NYSE:SCHW)
EPS Next 5 Year Ratio: 18.46%
Dividend Yield as of 2/20: 1.25%
The Charles Schwab Corporation (NYSE:SCHW) is a leading provider of financial services, with 33.8 million active brokerage accounts, 2.4 million corporate retirement plan participants, 1.7 million banking accounts, and $7.05 trillion in client assets.
For the fourth quarter, the company reported adjusted EPS of $1.07 on net sales of $5.497 billion versus the consensus of $1.09 on revenue of $5.56 billion. For the full year, The Charles Schwab Corporation (NYSE:SCHW) 2022 revenues rose 12% year over year to $20.8 billion and the company’s adjusted EPS was $3.90.
The Charles Schwab Corporation (NYSE:SCHW) has an EPS next 5 year ratio of 18.46% and a dividend yield of 1.25% as of 2/20.
2. Mastercard Incorporated (NYSE:MA)
EPS Next 5 Year Ratio: 20.34%
Dividend Yield as of 2/20: 0.63%
Mastercard Incorporated (NYSE:MA) is a payments network that analysts expect will increase its EPS on average by 20.34% a year for the next 5 years. For Q4, the company reported adjusted EPS of $2.65 on sales of $5.82 billion versus the consensus of $2.58 on revenue of $5.79 billion.
Mastercard Incorporated (NYSE:MA) CEO Michael Miebach said in January, “We closed out the year with strong financial results and notable wins which will help us capitalize on the tremendous secular shift to digital payments. As we look at the broader economy, we see the continued recovery of cross-border travel, with volumes up 59% versus a year ago and we’re encouraged by Asia opening up further. While macroeconomic and geopolitical uncertainty persists, consumer spending has been remarkably resilient. We are well prepared to adjust our investment profile quickly if needed.”
Like Visa, Mastercard Incorporated (NYSE:MA) could be affected by the CFPB proposed rule to curb excessive credit card late fees although the exact effect on growth is uncertain. As of 2/20, the company has a dividend yield of 0.63%.
1. Interactive Brokers Group, Inc. (NASDAQ:IBKR)
EPS Next 5 Year Ratio: 22.95%
Dividend Yield as of 2/20: 0.46%
Interactive Brokers Group, Inc. (NASDAQ:IBKR) is a leading brokerage firm that ranks #1 on our list of 10 High Growth Low Dividend Stocks to Buy given analysts expect the company to grow its EPS by an average of 22.95% a year for the next 5 years. For the quarter ended December 31, 2022, Interactive Brokers Group, Inc. (NASDAQ:IBKR) had adjusted EPS of $1.30 on adjusted revenues of $958 million. Interactive Brokers Group, Inc. (NASDAQ:IBKR) has an annual dividend of $0.40 per share, which as of 2/20 is a dividend yield of 0.46%.
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Disclosure: None. 10 High Growth Low Dividend Stocks to Buy is originally published on Insider Monkey.
