Though the yields have risen significantly, the appeal for dividend stocks remains, especially the ones that have a strong history of dividend growth. This is because these stocks form a healthy portfolio with more scope for capital appreciation as opposed to those that pay high yields.

Why Dividend Growth?

Stocks that have a history of enhancing shareholder returns generally act as a hedge against economic uncertainty or stock market volatility.

Additionally, these stocks have superior fundamentals compared to other dividend paying stocks as dividend growth reflects a sustainable business model, a long track of profitability, rising cash flows, good liquidity, a strong balance sheet and some value characteristics. All these make dividend growth a quality and promising investment for the long term.

However, the long history of outperformance by dividend growth stocks compared with the broader stock market or any other dividend paying stocks does not necessarily mean that they have the highest yields.

Here are the screening parameters that could result in a winning dividend growth portfolio:

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.

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.

Zacks Rank Less than 3: 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.

Market Capitalization greater than $2 billion: We have eliminated small caps stocks to ensure better flexibility and tradability.

Here are seven of the 22 stocks that fit the bill:

Thor Industries Inc. (THO - Free Report) ): This Indiana-based company designs, manufactures, and sells recreational vehicles, and related parts and accessories primarily in the United States and Canada. The stock saw a whopping earnings estimate revision of 58 cents for the current fiscal year over the past 90 days with an expected earnings growth rate of 24.38%. The stock has a VGM Style Score of A and sports a Zacks Rank #1. 

Southwest Gas Corporation (SWX - Free Report) ): This Nevada-based company is engaged in the business of purchasing, transporting and distributing natural gas in portions of Arizona, Nevada and California. It saw positive earnings estimate revision of 3 cents for this year over the past 90 days, with an expected growth rate of 8.05%. Southwest Gas has a Zacks Rank #2 and a VGM Style Score of B.

DTE Energy Company (DTE - Free Report) ): This Michigan-based company is a diversified energy company involved in the development and management of energy-related businesses and services nationwide. It saw solid earnings estimate revision of 21 cents for this year over the past 90 days with an expected earnings growth of 9.27%. The stock has a Zacks Rank #2 and a VGM Style Score of B.

Papa John's International Inc. (PZZA - Free Report) ): This Kentucky-based company operates and franchises pizza delivery and carryout restaurants under the Papa John’s trademark in the United States and internationally. The company saw earnings estimate revision of six cents over the past 90 days for this year and has an expected growth rate of 4.93%. It has a Zacks Rank #2 and a VGM Style Score of B.

EnerSys (ENS - Free Report) ): This Pennsylvania-based company is a global leader in stored energy solutions for industrial applications. It saw solid earnings estimate revision of 19 cents for this fiscal year over the past three months, with an expected earnings growth of 16.54%. It has a Zacks Rank #1 and a VGM Style Score of B.

Everest Re Group Ltd. (RE - Free Report) ): This Bermuda-based company is a world leader in property and casualty reinsurance and insurance, offering innovative products, responsive service and unsurpassed financial strength. The stock saw a whopping earnings estimate revision of $1.17 over the past 90 days for this year and delivered earnings surprises in three of the past four quarters, with an average beat of 25.64%. It has a Zacks Rank #2 and a VGM Style Score of B.

Lockheed Martin Corporation (LMT - Free Report) ): This Maryland-based company is a global enterprise principally engaged in the research, design, development, manufacture and integration of advanced-technology systems, products and services. The stock saw solid earnings estimate revision of 24 cents over the past 90 days for this fiscal year, with an expected earnings growth rate of 5.64%. It has a Zacks Rank #2 and a VGM Style Score of A.