3 Dividend Growth Stocks to Buy as Fed Expected to Keep Rates Higher

A strong August U.S. employment report reinforced expectations that the Federal Reserve will keep rates higher for longer, contributing to a weak end to the week for major equity indices and pressure on growth-oriented stocks. Zacks recommends dividend-growth names as a more defensive alternative, highlighting EnerSys (ENS), Cheesecake Factory (CAKE) and Victory Capital (VCTR), with estimated revenue growth of 3.7%, 7.0% and 24.7%, respectively. The three stocks offer relatively modest dividend yields of 0.58%-1.76% and carry Zacks Rank #1 or #2 ratings.

Analysis

The screen’s signal is weaker than it appears: low payout yields provide little duration hedge, while the three names retain meaningful economic cyclicality. ENS has the most differentiated earnings pathway because critical-power demand from data centers, telecom infrastructure and defense can offset industrial softness; its valuation should be judged against order growth and backlog conversion rather than its dividend. A sustained acceleration in hyperscale power build-outs could create upside to consensus over the next 6-18 months.

CAKE is the least defensive expression of the group. Higher-for-longer policy pressures discretionary traffic, credit-dependent consumers and restaurant-level labor/occupancy costs simultaneously; modest same-store-sales misses can translate disproportionately into EBITDA deleverage. The relevant 1-3 month catalyst is quarterly traffic and margin commentary, not dividend-growth optics. Restaurant peers with greater value positioning or franchise-heavy models should hold up better if consumer spending decelerates.

VCTR is a leveraged play on market levels, net flows and fee-rate mix rather than a bond-proxy dividend compounder. Elevated cash yields may support money-market-related assets near term, but risk-asset drawdowns and lower beta/inflows would challenge its revenue-growth narrative; conversely, a broad equity rally or evidence of sustained organic flows can drive estimate revisions quickly. The contrarian conclusion is that a generic rotation into "dividend growth" is unlikely to rerate these names: ENS needs infrastructure execution, VCTR needs flows, and CAKE needs resilient consumer demand.

Key Decisions for Investors

• Prefer ENS over CAKE for a 6-12 month quality-cyclical allocation; initiate only after confirming backlog/order growth and gross-margin stability at the next earnings release. Thesis fails if orders decelerate materially for two consecutive quarters or management cuts full-year margin guidance.
• Use a 1-3 month pair trade: long ENS / short CAKE in equal dollar amounts to isolate critical-power capex from weakening discretionary dining demand. Target a 10-15% relative return; exit if CAKE traffic materially accelerates while ENS bookings weaken.
• Keep VCTR on a flow-data watch list rather than treating it as a defensive income holding. Buy after quarterly organic net flows turn sustainably positive and AUM growth exceeds market appreciation; avoid/add downside hedges if equity-market weakness produces renewed outflows or fee-rate compression.
• Do not deploy options solely on the screening result: current valuation, implied volatility and payout ratios are required to establish asymmetric risk/reward. Reassess after earnings guidance and capital-return updates.