I look for three qualities in a dividend stock. And high yield isn’t one.

To start, I like competitive yields. By competitive, I mean something that yields a little better than conservative bonds. There was a time when that meant 7% to 8% — but that’s not today. The 10-year U.S. Treasury yields about 1.5%, and 10-year A-rated corporate bonds only yield about 2.5%. In a low-yield world, 3% to 4% dividend yields are competitive — and safe.

You can find pockets of the stock market that pay out a lot more than that. Yields of 8% to 10% or even more are pretty common among REITs, mortgage REITs, MLPs and closed-end funds, for example. But you can’t dump your entire stock portfolio into these non-diversified sectors. For a nice diversified portfolio of dividend stocks, 3% to 4% is your target.

Secondly, I like dividend growth. If a stock’s dividend isn’t growing by 2% to 3% every year, you’re losing ground to inflation and losing money.

Finally, I like to see stable, staid business models that are more immune to recessions. Remember, we’re looking for steady income here. A dividend does you no good if it is cut or eliminated.

With that as background, let’s take a look at a stock that ticks all three of my boxes: packaged foods company Conagra Brands Inc. (NYSE: CAG).

Conagra sells many of the brands you know and love: Healthy Choice, Duncan Hines, Pam, Hunt’s and a host of others. They even own Hebrew National — which is, in my informed opinion, the world’s best hotdog.

Immediately,  Conagra meets my third criterion. Few businesses are as stable as packaged food.

Conagra also meets my first two criteria. It yields a little over 3%, and the company has raised its dividend by a cumulative 77% since 2010. It’s safely ahead of inflation. It isn’t enough to buy you a new Maserati, but it’s a nice, stable income stream to help with your retirement expenses.

And about that Maserati … don’t be surprised if CAG enjoys a nice run over the next year. The stock rates a 70 out of 100 in our Green Zone Ratings system, putting it firmly in “Bullish” territory. Based on Adam O’Dell’s research, Bullish stocks outperform the broader market by two times over the subsequent 12 months.

Let’s see what makes Conagra a dividend stock with market-beating potential.

Conagra Brand’s Green Zone Rating

Volatility — Conagra Brands stock rates highest on volatility at a 97 out of 100. This means that Conagra is less volatile than all but 3% of the stocks in our universe. This makes sense when you consider Conagra’s business model. Grocery foods are a low-risk business more or less immune to business cycle swings.

Value — CGA also rates very highly on value with a score of 83. And value stocks have been ripping higher in 2021. We may be setting up for a repeat of the 2000-2008 period where value stocks dominated growth stocks.

Growth — On that note, CGA isn’t slouching on growth. It rates a 77 out of 100. It’s growing faster than more than three-quarters of the stocks in our universe.

Quality — Conagra Brands stock also touts a respectable quality score of 71. The company’s branding power helps here. Its portfolio of household names commands premium pricing compared to generic or lesser-known brands.

Momentum — Conagra won’t wow you on momentum with a score of just 21. That’s understandable. Value stocks have lagged, and growth-hungry investors couldn’t be bothered with an established food company with all the shiny new SPACs and tech companies popping up. If value stocks regain market leadership, I expect that we’ll see CGA’s momentum score pick up.

Size — Conagra is a large company with a market cap of $17 billion. It rates low based on our size metric with a score of 8.

Bottom line: Overall, Conagra rates well on our system. So, in addition to securing a stable, reliable dividend, Conagra is well-positioned to beat the market over the next year or more.

To safe profits,

Charles Sizemore_Sig




Charles Sizemore is the editor of Green Zone Fortunes and specializes in income and retirement topics. Charles is a regular on The Bull & The Bear podcast. He is also a frequent guest on CNBC, Bloomberg and Fox Business.