In this article, we discuss 11 best stocks to buy for income. You can skip our detailed analysis of income-generating stocks and the performance of dividend stocks over the years, and go directly to read 5 Best Stocks to Buy for Income.
Markets are wavering amid a mix of corporate earnings reports that didn't meet expectations and worries about rising interest rates. Notably, the yield on the 10-year U.S. Treasury note briefly surpassed the 5% mark, a level not seen in 16 years, which further contributed to investor concerns. They are now looking more at assets that generate income due to the current uncertainty. A strong income-focused portfolio combines various income-generating assets like bonds, dividend stocks, and real estate. This mix helps lower risks and enhances the potential for steady, long-term returns.
Dividend stocks offer more than just income; they create a virtuous cycle of growth. Strong dividend growth is beneficial for investors in several ways. It can enhance returns and act as a shield against inflation by offering a steadily increasing income stream, much like an annual raise in your earnings. Additionally, dividend-growing stocks have the potential for price appreciation because they often reflect a company's improving earnings and dividend payments over time. According to a report by T. Rowe Price, historically, large-cap dividend-growing stocks have shown resilience during market downturns, experienced smaller losses, and performed well when the market remained stable. In addition, they've managed to capture a significant portion of the market's upswings during more favorable economic conditions. The report also mentioned that over the period from 1985 to 2022, companies that increased their dividends within the Russell 1000 Index outperformed the overall market index, and they did so with less volatility.
Lower volatility is one of the factors that attract investors to dividend stocks. The reduced price fluctuations in dividend stocks can provide a sense of stability and predictability in an investor's portfolio, which is especially appealing to those who prioritize income generation and want to avoid significant market ups and downs. Wisdom Tree reported that over the past 64 years, dividend levels decreased in just six years, and only once did they drop by more than 5%. In contrast, stock prices experienced declines in 18 of those 64 years, with the worst yearly drop exceeding 40% and an average decline of over 11%. This data suggests that stock prices are significantly more volatile than the cash flows from dividends.
Some of the best stocks to buy for income include The Procter & Gamble Company (NYSE:PG), Colgate-Palmolive Company (NYSE:CL), and PepsiCo, Inc. (NASDAQ:PEP) as these companies have been making regular dividend payments to shareholders for a long time and have also raised their payouts for decades. In this article, we will further discuss some other stocks for income.
For this list, we scanned Insider Monkey's database of Q2 2023 and picked dividend stocks with dividend yields of at least 4.5%, as of October 28. From this group, we chose dividend-paying companies that maintain consistent dividend track records, even with their higher-than-average yields. These stocks aim to offer reliable income to their shareholders. The stocks are ranked in ascending order of the number of hedge funds having stakes in them, as of the second quarter of 2023.
Altria Group, Inc. (NYSE:MO) is an American multinational tobacco company. It primarily operates in the tobacco and related industries, with its core business focused on manufacturing and marketing tobacco products. In its recently announced third-quarter earnings, the company declared that it paid nearly $1.6 billion to shareholders through dividends, which makes it one of the best stocks for income.
Altria Group, Inc. (NYSE:MO) currently pays a quarterly dividend of $0.98 per share, having raised it by 4.3% in August this year. This was the company's 54th consecutive year of dividend growth. As of October 28, the stock has a dividend yield of 9.97%. In addition to MO, other dividend stocks to consider for income include The Procter & Gamble Company (NYSE:PG), Colgate-Palmolive Company (NYSE:CL), and PepsiCo, Inc. (NASDAQ:PEP).
At the end of Q2 2023, 43 hedge funds tracked by Insider Monkey owned stakes in Altria Group, Inc. (NYSE:MO), compared with 49 in the previous quarter. These stakes have a total value of over $446.2 million. With over 7.2 million shares, Harris Associates was the company's leading stakeholder in Q2.
3M Company (NYSE:MMM) is a Minnesota-based diversified multinational conglomerate that operates in various industries. The company is known for its innovation and the development of a wide range of products and solutions. It currently pays a quarterly dividend of $1.50 per share and has a dividend yield of 6.86%, as of October 28. It is one of the best stocks for income on our list as the company has been growing its dividends for 65 consecutive years.
3M Company (NYSE:MMM) generated strong cash in the third quarter of 2023. Its operating cash flow for the quarter came in at roughly $2 billion and its free cash flow amounted to $1.9 billion. Not only this, the company also returned $828 million to shareholders in dividends.
As of the end of Q2 2023, 49 hedge funds owned stakes in 3M Company (NYSE:MMM) as per Insider Monkey's database, down from 51 in the previous quarter. These stakes are collectively valued at over $726.7 million.
9. International Business Machines Corporation (NYSE:IBM)
Number of Hedge Fund Holders: 51
Dividend Yield as of October 28: 4.66%
International Business Machines Corporation (NYSE:IBM) is a globally recognized multinational technology and IT company. The company was a part of 51 hedge fund portfolios at the end of Q2 2023, up from 49 in the previous quarter, Insider Monkey's data indicated. The collective value of stakes owned by these hedge funds is nearly $814 million.
In the third quarter of 2023, International Business Machines Corporation (NYSE:IBM) reported revenue of $14.8 billion, up 5% from the same period last year. During the quarter, it returned $1.5 billion to shareholders through dividends, which makes IBM one of the best stocks for income.
International Business Machines Corporation (NYSE:IBM)'s commitment to shareholders can be seen from the fact that the company has raised its payouts for 28 years in a row. The company's quarterly dividend currently stands at $1.66 per share for a dividend yield of 4.66%, as recorded on October 28.
Verizon Communications Inc. (NYSE:VZ) is a major American telecommunications company that provides a variety of communication and technology services. On September 7, the company declared a 1.9% hike in its quarterly dividend to $0.665 per share. This marked the company's 17th consecutive year of dividend growth, which makes it one of the best stocks for income.
At the end of Q2 2023, 53 hedge funds in Insider Monkey's database reported having stakes in Verizon Communications Inc. (NYSE:VZ), compared with 59 in the previous quarter. The consolidated value of these stakes is roughly $829 million. Among these hedge funds, Diamond Hill Capital was the company's leading stakeholder in Q2.
Philip Morris International Inc. (NYSE:PM) is a Connecticut-based tobacco company that sells its products in over 180 countries. In the third quarter of 2023, the company posted revenue of $9.14 billion, up 13.8% from the same period last year. For FY2023, it expects to generate approximately $10 billion in operating cash flow.
On September 13, Philip Morris International Inc. (NYSE:PM) declared a quarterly dividend of $1.30 per share, raising it by 2.4%. Through this increase, the company stretched its dividend growth streak to 15 years, which places it as one of the best stocks for income. The stock's dividend yield on October 28 came in at 5.94%.
At the end of June 2023, 54 hedge funds tracked by Insider Monkey owned stakes in Philip Morris International Inc. (NYSE:PM), compared with 55 in the previous quarter. The collective worth of these stakes is over $5 billion. With more than 15.7 million shares, Fundsmith LLP was the company's leading stakeholder in Q2.
AT&T Inc. (NYSE:T) is next on our list of the best stocks for income. The diversified telecommunications and media company has been making regular dividend payments to shareholders since 1995. It currently pays a quarterly dividend of $0.2775 per share for a dividend yield of 7.49%, as recorded on October 28.
AT&T Inc. (NYSE:T) can be a reliable addition to income portfolios alongside some other stocks such as The Procter & Gamble Company (NYSE:PG), Colgate-Palmolive Company (NYSE:CL), and PepsiCo, Inc. (NASDAQ:PEP).
Insider Monkey's database of Q2 2023 indicated that 56 hedge funds owned stakes in AT&T Inc. (NYSE:T), compared with 58 in the previous quarter. These stakes are collectively valued at over $1.4 billion. D. E. Shaw, Cliff Asness, and John Petry were some of the company's leading stakeholders in Q2.
