In this article, we discuss 12 best 5% dividend stocks to buy according to hedge funds. You can skip our detailed analysis of dividend stocks and their historical performance, and go directly to read 5 Best 5% Dividend Stocks To Buy According To Hedge Funds.
In response to fluctuating interest rates, there has been a noticeable shift in investment preferences towards high-yielding dividend stocks. This move is driven by the desire among investors to seek refuge from the effects of heightened interest rates. This observation isn't merely theoretical; some instances demonstrate the superior performance of high-dividend stocks during these periods. According to a report from Global X, as referenced in our article titled 10 Highest Dividend-Paying Stocks in the S&P 500, it was revealed that high-yielding dividend stocks have exhibited superior performance compared to the broader market during periods of elevated interest rates spanning from 1960 to 2017. The report further highlighted that high-dividend stocks outperformed the S&P 500 in 7 out of 10 instances since 1960.
Various other reports highlighted the significance of high-dividend stocks over the course of the long term. Historical data from Eugene Fama and Kenneth French suggested that high-dividend-paying stocks have tended to offer greater protection during market downturns compared to those with lower or no dividend payouts. These higher dividend-paying stocks have demonstrated a more favorable 30-year downside capture for a period ending in 2020, experiencing notably smaller losses relative to the S&P 500 Index compared to their counterparts with lower dividend yields. Generally, dividends serve as a marker of stability for companies, with many firms reinstating dividends after significant cuts in 2020, highlighting their commitment to long-term financial health.
That said, some analysts don't buy into the idea that higher yields always mean better investments. They're more interested in companies that consistently grow their dividends. Dennis DeBusschere, the chief market strategist at 22V Research, shared his perspective with Barron's, emphasizing the importance of focusing on companies capable of increasing their dividend payouts in the face of a higher interest rate environment. To this end, he curated a list of 50 such companies for his clients. These companies boast sustainable dividend growth, with an average yield of approximately 2.6%. They also distribute less than half of their net income as dividends and are projected to achieve an earnings growth rate of about 8% annually over the next few years. He further said that investors should prioritize stocks of higher quality with lower dividend yields and stronger financial indicators instead of solely chasing after the allure of higher dividend payments. This strategic approach will likely result in a more robust and rewarding portfolio in the long run.
Our research indicates that while it may not be readily apparent, high dividend yields and consistent dividend growth can indeed coexist. Companies like Pfizer Inc. (NYSE:PFE), Philip Morris International Inc. (NYSE:PM), and 3M Company (NYSE:MMM) have maintained a track record of consistently increasing their dividend payouts over the years, while also providing dividend yields surpassing the market average, exceeding 5%. In this article, we will further discuss some of the best dividend stocks with yields above 5%.
Best 5% Dividend Stocks To Buy According To Hedge Funds
For this list, we scanned Insider Monkey’s database of 933 hedge funds as of the fourth quarter of 2023 and picked 12 dividend stocks that have yields above 5%, as of March 15. These companies have strong histories of paying dividends to shareholders. The stocks are ranked in ascending order of hedge funds’ sentiment toward them. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here).
Kinder Morgan, Inc. (NYSE:KMI) is a Texas-based pipeline transportation and natural gas company that offers storage, transportation, and terminal services to customers in various sectors of the energy industry. The company currently pays a quarterly dividend of $0.2825 per share and has a dividend yield of 6.44%, as of March 15. With a six-year streak of dividend growth, KMI is one of the best dividend stocks with over 5% yield.
At the end of Q4 2023, 42 hedge funds tracked by Insider Monkey reported having stakes in Kinder Morgan, Inc. (NYSE:KMI), the same as in the previous quarter. The total value of these stakes is more than $977.8 million.
Altria Group, Inc. (NYSE:MO) is a multinational corporation primarily known for its involvement in the tobacco and related industries. The company's main activities include the manufacturing and sale of cigarettes, smokeless tobacco products, and wine. On February 29, the company declared a quarterly dividend of $0.98 per share, which was in line with its previous dividend. Not only the company has been growing its dividends for 54 consecutive years, but it also offers an impressive dividend yield of 8.85%, as of March 15. MO is among the best dividend stocks on our list with over 5% yield.
As of the close of Q4 2023, 42 hedge funds in Insider Monkey's database reported having stakes in Altria Group, Inc. (NYSE:MO), growing from 40 in the previous quarter. The collective value of these stakes is over $1.08 billion. With over 10 million shares, Harris Associates was the company's leading stakeholder in Q4.
VICI Properties Inc. (NYSE:VICI) is next on our list of the best dividend stocks with over 5% yield. The real estate investment trust company specializes in the acquisition, ownership, and leasing of gaming, hospitality, and entertainment properties. The company currently offers a quarterly dividend of $0.415 per share, having raised it by 6.4% in September 2023. That was its sixth consecutive annual dividend hike, which makes VICI one of the best dividend stocks on our list. As of March 15, the stock has a dividend yield of 5.76%.
The number of hedge funds tracked by Insider Monkey holding stakes in VICI Properties Inc. (NYSE:VICI) jumped to 44 in Q4 2023, from 33 in the preceding quarter. The total value of these stakes is over $960 million. Ken Griffin's Citadel Investment Group owned a VICI stake worth nearly $300 million, becoming the company's leading stakeholder in Q4.
Crown Castle Inc. (NYSE:CCI) is a Texas-based real estate investment trust company that specializes in owning, operating, and leasing shared communications infrastructure. The company pays a quarterly dividend of $1.565 per share and has a dividend yield of 5.90%, as of March 15. During FY23, the company returned $2.7 billion to shareholders through dividends, which showed a 4.7% increase on a per-share basis compared to the same period a year ago.
Crown Castle Inc. (NYSE:CCI) was a part of 45 hedge fund portfolios at the end of Q4 2023, which remained unchanged from the previous quarter, according to Insider Monkey's database. The stakes owned by these hedge funds have a total value of roughly $1.6 billion.
LyondellBasell Industries N.V. (NYSE:LYB) specializes in the production and marketing of a wide range of chemicals, polymers, and plastics. Additionally, the company is involved in the refining of crude oil into petroleum products. On February 23, the company declared a quarterly dividend of $1.25 per share, which was in line with its previous quarter. The company has raised its payouts for 13 consecutive years, which makes LYB one of the best dividend stocks with high yields. The stock's dividend yield on March 15 came in at 5.01%.
LyondellBasell Industries N.V. (NYSE:LYB) was a popular buy among elite funds in Q4 2023, as 46 hedge funds tracked by Insider Monkey owned stakes in the company, up from 36 in the previous quarter. The overall value of these stakes is roughly $520 million. Among these hedge funds, AQR Capital Management was the company's leading stakeholder in Q4.
KeyCorp (NYSE:KEY) is an Ohio-based financial services company that provides a range of banking and financial services to individuals, businesses, and institutions across the US. The company's current quarterly dividend comes in at $0.205 per share and has a dividend yield of 5.69%, as of March 15.
The number of hedge funds in Insider Monkey's database holding stakes in KeyCorp (NYSE:KEY) jumped to 49 in Q4 2023, from 42 in the preceding quarter. The collective value of these stakes is roughly $1.2 billion. Citadel Investment Group was the company's leading stakeholder in Q4, owning over 18 million of its shares.
Truist Financial Corporation (NYSE:TFC) ranks sixth on our list of the best dividend stocks on our list. The financial services has been making regular dividend payments since 1997. It currently pays a quarterly dividend of $0.52 per share for a dividend yield of 5.94%, as recorded on March 15.
Insider Monkey's database of Q4 2023 indicated that Truist Financial Corporation (NYSE:TFC) remained popular among hedge funds in Q4 2023, with 59 funds holding stakes in the company, growing from 47 in the previous quarter. The consolidated value of these stakes is more than $2.11 billion.
