In this article, we discuss 12 best long-term dividend stocks to buy now. You can skip our detailed analysis of dividend stocks and their performance over the years, and go directly to read 5 Best Long-Term Dividend Stocks To Buy Now.
Last year was challenging for the overall stock market and particularly for growth stocks. On the other hand, dividend indexes and portfolios focused on dividends performed relatively well. Some even managed to achieve a small gain during that period. This year, the stock market has experienced a shift in investing style as growth stocks are reasserting their dominance over dividend stocks. However, this does not indicate that dividend stocks have lost their appeal as income generation and compounding growth continue to be the prime focus of investors this year as well.
Evaluating the growth rate of dividends over multiple years can provide an understanding of the contribution of dividend stocks to long-term wealth creation. Increasing dividends mean shareholders receive larger cash payments over time. This growing income stream can be particularly beneficial for individuals who rely on dividend income for living expenses or as a source of regular cash flow. Moreover, companies that raise their payouts regularly have outperformed the market historically. According to a report by T. Rowe Price, the S&P 500 Dividend Aristocrat Index, which tracks the performance of companies with 25 consecutive years of dividend increases, has outperformed the S&P 500 by over 75% since 1989. Some of the best long-term stocks in this regard are Walmart Inc. (NYSE:WMT), Johnson & Johnson (NYSE:JNJ), and AbbVie Inc. (NYSE:ABBV).
Analysts have expressed a positive view of dividend stocks and exchange-traded funds in 2023 because of their long-term impact on returns. They believe that dividend funds are a safer choice because they invest in companies that have strong financial positions and healthy cash flows. These factors make them more likely to withstand economic downturns and remain resilient. Christopher Huemmer, senior vice president at FlexShares Exchange Traded Funds, highlighted the significance of dividend stocks while speaking with Reuters in April. He said:
"Though we have experienced periods where the capital appreciation of a stock’s price has dwarfed the return from dividend income, the power of dividends should not be overlooked as a crucial component of equity performance."
He further stated:
"In volatile markets, dividends can act like the keel of a sailboat, providing a level of stable return in choppy seas."
The historical evidence consistently supports the substantial contribution of dividend stocks to overall market returns. In our article titled 25 Things Every Dividend Investor Should Know, we reported Hartford Fund’s data, which showed that dividend income represented 41% of the S&P 500’s total return on average from 1930 to 2022. We also reported that from 2000 to 2009, the S&P 500 experienced negative returns due to the dot-com bubble burst in March 2000. Despite this, dividends provided a positive annualized return of 1.8% during that period. The fact that dividend income has accounted for a considerable portion of the S&P 500's total return emphasizes the significance of dividends for long-term investors, who prioritize generating regular cash flow from their investments.
For this list, we scanned Insider Monkey's database of 943 hedge funds as of Q1 2023 and selected companies that have raised their dividends for 15 consecutive years or more. Out of those companies, we shortlisted the stocks that have five-year average payout ratios of less than 60%. This also indicates that these companies allocate a healthy portion of their earnings in dividend payouts. From the resultant dataset, we picked 12 stocks with the highest number of hedge fund investors. The stocks are ranked in ascending order of hedge funds' sentiment towards them.
United Bankshares, Inc. (NASDAQ:UBSI) is a West Virginia-based bank holding company that offers personal banking, business banking, and wealth management services to its consumers. On May 10, the company declared a quarterly dividend of $0.36 per share, which was in line with its previous dividend. In 2022, it stretched its dividend growth streak to 49 years, which makes it one of the best long-term stocks. The stock has a dividend yield of 4.85%, as of June 27.
In addition to Walmart Inc. (NYSE:WMT), Johnson & Johnson (NYSE:JNJ), and AbbVie Inc. (NYSE:ABBV), United Bankshares, Inc. (NASDAQ:UBSI) can also be added to dividend portfolios because of its consistent dividend growth.
In the first quarter of 2023, United Bankshares, Inc. (NASDAQ:UBSI) reported strong earnings with revenue of $267 million, which showed a 12.4% growth from the same period last year. At the end of March 31, the company had roughly $2 billion in cash and cash equivalents, compared with $1.17 billion in the prior-year quarter.
At the end of Q1 2023, 8 hedge funds tracked by Insider Monkey reported having stakes in United Bankshares, Inc. (NASDAQ:UBSI), compared with 9 in the previous quarter. These stakes have a collective value of over $12.8 million. Among these funds, Basswood Capital was the company's leading stakeholder in Q1.
California Water Service Group (NYSE:CWT) is an American public utility company that provides drinking water and wastewater services. The company's operating revenue for the first quarter of 2023 came in at $131 million. With a 5-year average payout ratio of 57.8%, CWT is one of the best long-term stocks on our list.
California Water Service Group (NYSE:CWT) has been growing its dividends for the past 56 years. It currently pays a quarterly dividend of $0.26 per share and has a dividend yield of 2.08%, as of June 27.
As of the close of Q1 2023, 14 hedge funds in Insider Monkey's database reported having stakes in California Water Service Group (NYSE:CWT), the same as in the previous quarter. These stakes have a consolidated value of $111.3 million.
Sonoco Products Company (NYSE:SON) is a global packaging solutions provider that specializes in manufacturing industrial and consumer packaging products and providing related services. The company's cash flow remained solid during the first quarter of 2023, as its operating cash flow jumped to $98 million, from $1 million in the same period last year. It generated $86 million in free cash flow and paid $48 million in dividends to shareholders.
On April 19, Sonoco Products Company (NYSE:SON) declared a 4.1% hike in its quarterly dividend to $0.51 per share. This was the company's 40th consecutive year of dividend growth, which makes it one of the best long-term stocks on our list. The stock's dividend yield on June 27 came in at 3.53%.
Sonoco Products Company (NYSE:SON) was a part of 18 hedge fund portfolios, up from 17 in the previous quarter, as per Insider Monkey's database. The stakes owned by these hedge funds have a collective value of $140.6 million. With over 1.1 million shares, Impax Asset Management was the company's leading stakeholder in Q1.
MDU Resources Group, Inc. (NYSE:MDU) is an American diversified natural resource company. It operates in various sectors, including energy, construction materials, and services. In June, BofA double-upgraded the stock to Buy from Underperform with a $22 price target, taking into account the spinoff of Knife River.
In the first quarter of 2023, MDU Resources Group, Inc. (NYSE:MDU) reported revenue of $1.74 billion, which showed a 22.5% growth from the same period last year. The company's operating income for the quarter came in at $74.5 million, up 10.7% from the prior-year period.
MDU Resources Group, Inc. (NYSE:MDU), one of the best long-term stocks, currently pays a quarterly dividend of $0.2225 per share. The company has rewarded shareholders with growing dividends for the past 32 years. The stock has a dividend yield of 4.38%, as of June 27.
At the end of March 31, 29 hedge funds in Insider Monkey's database reported having stakes in MDU Resources Group, Inc. (NYSE:MDU), up from 27 in the previous quarter. These stakes have a total value of over $576.2 million.
Waste Management, Inc. (NYSE:WM) is a Texas-based company that mainly provides environmental services to its consumers. It operates as a comprehensive provider of waste collection, disposal, recycling, and environmental solutions for residential, commercial, industrial, and municipal customers.
On May 9, Waste Management, Inc. (NYSE:WM) declared a quarterly dividend of $0.70 per share, which was in line with its previous dividend. The company maintains a 20-year streak of dividend growth, which makes it one of the best long-term stocks on our list. As of June 27, the stock has a dividend yield of 1.67%.
In April, Stifel upgraded Waste Management, Inc. (NYSE:WM) to Buy and also raised its price target on the stock to $177. The firm mentioned that the company is well-positioned to benefit from a recovery in commodities prices.
According to Insider Monkey's database of Q1 2023, 43 hedge funds owned stakes in Waste Management, Inc. (NYSE:WM), worth roughly $7 billion collectively. With over 35 million shares, Bill & Melinda Gates Foundation Trust was the company's leading stakeholder in Q1.
Texas Instruments Incorporated (NASDAQ:TXN) is next on our list of the best long-term dividend stocks. The American semiconductor manufacturing company has a 19-year run of raising its dividends. It currently offers a quarterly dividend of $1.24 per share and has a dividend yield of 2.90%, as of June 27.
In the first quarter of 2023, Texas Instruments Incorporated (NASDAQ:TXN) reported an operating cash flow of $1.12 billion and its free cash flow amounted to $178 million. For the trailing 12 months period, the company's free cash flow was $4.4 billion, which represented 23% of the revenue.
At the end of Q1 2023, 52 hedge funds tracked by Insider Monkey owned stakes in Texas Instruments Incorporated (NASDAQ:TXN), worth collectively $3 billion roughly.
Caterpillar Inc. (NYSE:CAT) ranks sixth on our list of the best long-term stocks. On June 14, the company declared a quarterly dividend of $1.30 per share, having raised it by 8% from the previous dividend. This marked the company's 29th consecutive year of dividend growth. The stock's dividend yield on June 29 came in at 2.19%.
Other dividend stocks that are on investors' radars include Walmart Inc. (NYSE:WMT), Johnson & Johnson (NYSE:JNJ), and AbbVie Inc. (NYSE:ABBV).
In May, Evercore ISI gave a positive outlook on the industrial machinery group. The firm gave an Outperform rating to Caterpillar Inc. (NYSE:CAT) with a $263 price target.
At the end of Q1 2023, Caterpillar Inc. (NYSE:CAT) was a part of 52 hedge fund portfolios, up from 50 in the preceding quarter, as per Insider Monkey’s data. The stakes owned by these funds have a consolidated value of over $2.88 billion.
