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On the other hand, if you are looking for a combination of growth and income, lower prices for companies with decent prospects for increasing their revenue and earnings could help you identify attractive dividend payers.

Breaking into value and growth camps

Value stocks are generally considered to be those that trade relatively low relative to earnings and that are expected to expand their businesses relatively slowly. Companies in the value camp typically pay dividends. Growth stocks tend to be more expensive relative to earnings, and the companies often don’t pay dividends as they focus on expansion.

S&P Dow Jones Indices divides the S&P 500 into the S&P 500 Value Index and the S&P 500 Growth Index by scoring stocks based on various factors. Valuation metrics include book value, earnings and revenue to price, while growth metrics include trailing three-year growth rates for earnings and revenue, as well as 12-month price momentum.

But this scoring methodology leads to overlapping groups of stocks. There are 398 stocks in the S&P 500 Value Index, which is tracked by the iShares S&P 500 Value ETF IVE. There are 211 stocks in the in the S&P 500 Growth Index, which is tracked by the iShares S&P 500 Growth ETF IVW. The Value and Growth indexes are weighted by market capitalization.

Apple Inc. AAPL, for example, is the largest component of the iShares S&P 500 Value ETF, making up 7.2% of the portfolio. Apple is the third-largest component of the iShares S&P 500 Growth ETF, with a 6.1% portfolio weighting, behind Nvidia Corp. NVDA at 10.8% and Microsoft Corp. MSFT at 6.3%.

‘Pure value’

For investors who wish to avoid that value/growth overlap, S&P goes further with the S&P 500 Pure Value and Pure Growth indexes, which are weighted by S&P’s value or growth scores, rather than by market cap. So these not only narrow the focus, they get away from the market-cap weighting that has reflected the dominance of Big Tech over the past several years.

And S&P’s “pure” approach is also applied to the S&P MidCap 400 Index MID and the S&P Small Cap 600 Index SML. So the following screen begins with the holdings of three Invesco exchange-traded funds that track S&P’s Pure Value indexes:

So far this year, the non-cap-weighted pure-value approach has held up better than the cap-weighted value approach and the full-cap-weighted S&P 500. Again, these returns include reinvested dividends:

A broader screen for ‘pure value’

Together, there are 336 stocks in the three S&P Pure Value indexes. The full underlying indexes that the stocks are selected from make up the S&P Composite 1500 Index XX:SP1500. And S&P has its own selection criteria for companies initially to be included in its broad indexes, which are outlined here and include four consecutive quarters of profitability.

To screen the full group of pure value stocks for growth characteristics, we began by looking at FactSet’s estimates for the S&P Composite 1500’s revenue and earnings growth from 2024 through 2026. FactSet adjusts the data to match calendar years, for companies whose fiscal years don’t match the calendar.

Based on the estimates, the S&P Composite 1500 is expected to show two-year compound annual growth rates of 5.5% for revenue and 12.6% for earnings per share from 2024 through 2026.

Starting with our list of 336 pure value stocks, we narrowed the group to 283 companies covered by at least five analysts polled by FactSet. Then we cut the list to 122 companies rated a buy or the equivalent by a majority of the analysts.

Among the remaining 122 companies, only 10 are expected to increase their revenue at a CAGR of at least 11% (double that expected for the S&P Composite 1500) from 2024 through 2026. We are going to list them three times in the same order.

First, here are the 10 companies that passed the screen, sorted by projected revenue CAGR through 2026:

The table includes forward P/E ratios in the rightmost column. These are Monday’s closing prices divided by consensus EPS estimates for the next 12 months among analysts polled by FactSet. They are low for most of the companies when compared with the forward P/E of 18.7 for the S&P 500, 13.7 for the S&P MidCap 400 and 17.9 for the S&P Small Cap 600.

You might need to scroll the table or flip your screen to landscape to see all of the columns, depending on the device or web browser you are using.

There are four oil producers on the list, and fears of a possible recession in the wake of Trump’s tariff policies have helped push front-month contracts for West Texas Crude oil CL00 down to $63.35 a barrel as of early Tuesday, from $71.72 at the end of last year.

So there has been pressure on energy stocks. But there has been “massive discipline around spending” among U.S. oil producers, according to Nichole Hammond, who co-manages the Angel Oak High Yield Opportunities ETF AOHY. During an interview with MarketWatch on Monday, she said this discipline left the U.S. oil and natural gas industry in much better financial shape than it was in during the energy commodity price declines in 2015 and 2016.

Here is the list again, this time showing EPS for calendar 2024 with estimates for 2025 and 2026, all adjusted if necessary for companies whose fiscal years don’t match the calendar. Projected two-year EPS CAGR are to the right:

EPS CAGR is marked “N/A” for companies that had negative earnings in calendar 2024.

This last table includes dividend yields and consensus price targets for the group:

Click on the tickers for more about each company

Read: Tomi Kilgore’s detailed guide to the information available on the MarketWatch quote page

Don’t miss: This investing strategy has held up well during stock-market turmoil. It pays you to wait.

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