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For Positive Trends, Three's Company

From Standard & Poor's Equity Research

There's an old stock market adage that tells investors "the trend is your friend." Well, why just pal around with one? Why not three? For this week's screen, we decided to find stocks that were experiencing favorable long-term trends in key categories: revenues, net margins, and dividends.

First, we checked out the top line—revenues. We searched our database for companies that had reported year-over-year growth in sales in each of the past five years, pointing to strengthening business trends over that period.

ENCOURAGING SIGNS. Rising revenues are a good starting point, but what about the amount each company gets to keep? We next looked for those outfits with growth in net profit margin—after-tax as a percentage of sales—in each of the past five years. That could signal either improving efficiencies or favorable pricing power for these outfits.

And since we like solid dividend-paying stocks (who doesn't?), we next set out to find those companies that had increased their indicated annual dividend rates in each year over the same period. A long-term trend of rising dividends bodes well for future payout growth.

When we ran the numbers, these five names emerged:

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