In this article, we discuss 13 dividend kings to invest in for safe dividend growth. You can skip our detailed analysis of dividend growth stocks and their performance over the years, and go directly to read 5 Dividend Kings To Invest In For Safe Dividend Growth.
Dividend stocks are investors’ favorites, particularly ones that demonstrate a capacity to raise their dividend payments over an extended period. Dividend kings stand out in this regard as these companies have increased their payouts for 50 consecutive years or more. This indicates that numerous companies are inclined to regularly increase their dividends due to investors' preferences. One of the main reasons for this growth is the strong cash position of many high-quality companies. As reported by Harvard Business Review, non-banking U.S. companies have substantially boosted their cash reserves, reaching a staggering $6.9 trillion, exceeding the GDP of nearly all countries worldwide. Despite rising interest rates, cash holdings now constitute a significant portion, with $1 out of every $5 in total assets held by non-banking U.S. firms.
When investing in dividend stocks, investors are often faced with the dilemma of dividend yields and dividend growth. Analysts advise not to fall for yield traps and consider stocks that offer yields between 3% to 4%. Yields above this range may sometimes signal that the dividend payout is unsustainable or that the company is facing challenges. Brian Bollinger, president of Simply Safe Dividends, spoke with CNBC about ideal dividend yields and their significance. He suggested focusing on excellent businesses that could offer a dividend yield of around 3% to 4%. He explained that these companies tend to increase their dividend payments consistently, which helps increase yearly income and counteract the impact of inflation. Here are some other comments from the analyst:
“When stock prices fall, it’s so easy to panic, but dividend investing can overcome that because you’re just trying to stay focused on your income stream. You don’t care so much about the market’s short-term ups and downs anymore.”
S&P 500 Dividend Aristocrats index, which tracks the performance of companies with at least 25 consecutive years of dividend growth, has shown strong returns over the years, outperforming other asset classes despite market conditions. A ProShares report has presented a rather interesting take on investing in the index, particularly for income investors. The report mentioned that the index has consistently surpassed the performance of the S&P 500 while experiencing reduced levels of market volatility since its inception. This could mean that an initial investment of $10,000 made in May 2005 could potentially grow to over $61,000 by March 2023. The report further mentioned that the Dividend Aristocrats Index has demonstrated superior performance compared to the S&P 500 in eight out of the ten most significant quarterly downturns since 2005.
In 2023, dividend stocks encountered a phase of weaker performance due to a notable rise in yields, largely driven by the Federal Reserve's successive interest rate hikes. Nonetheless, expectations suggest a change in the outlook for income investing in 2024. Analysts at Lord Abbett predict that as the economy slows down, companies with solid balance sheets, good cash flow, and durable dividends will do better. Some of the best dividend kings include The Coca-Cola Company (NYSE:KO), PepsiCo, Inc. (NASDAQ:PEP), and The Procter & Gamble Company (NYSE:PG). These companies have a long-standing history of consistently increasing their dividends over many years. In this article, we will take a look at some other dividend kings with strong growth.
13 Dividend Kings To Invest In For Safe Dividend Growth
A close-up image of a stock market graph displaying the growth of the company's mutual funds.
Our Methodology:
For this article, we scanned the list of dividend kings, which are the companies that have raised their payouts for 50 years or more. From that list, we picked 13 companies with the highest 5-year annual average dividend growth rates. The stocks are ranked in ascending order of their annual average dividend growth in the past five years. We also considered hedge fund sentiment around each stock in Insider Monkey's database, as of the fourth quarter of 2023. 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).
Cincinnati Financial Corporation (NASDAQ:CINF) is an Ohio-based property casualty insurance company that offers commercial and personal lines of insurance, as well as excess and surplus lines, which cater to specialized or hard-to-place risks. The company offers a quarterly dividend of $0.81 per share, having raised it by 8% in January this year. This was the company's 63rd consecutive year of dividend growth, which makes CINF one of the best dividend kings on our list. The stock has a dividend yield of 2.76%, as of March 11.
At the end of Q4 2023, 33 hedge funds tracked by Insider Monkey reported having stakes in Cincinnati Financial Corporation (NASDAQ:CINF), up from 31 in the previous quarter. The collective value of these stakes is nearly $701 million.
Hormel Foods Corporation (NYSE:HRL) is a multinational food company that produces and markets a variety of consumer-branded food and meat products. The company pays a quarterly dividend of $0.2825 per share and has a dividend yield of 3.32%, as of March 11. With a dividend growth streak of 58 years, HRL is one of the best dividend kings on our list.
The number of hedge funds tracked by Insider Monkey owning stakes in Hormel Foods Corporation (NYSE:HRL) jumped to 25 in Q4 2023, from 18 in the previous quarter. The consolidated worth of these stakes is over $468 million. Among these hedge funds, Bill & Melinda Gates Foundation Trust was the company's leading stakeholder in Q4.
With a 5-year average annual dividend growth rate of 8.12%, Commerce Bancshares, Inc. (NASDAQ:CBSH) is next on our list of the best dividend kings to invest in. The regional bank holding company offers a variety of banking products and services to its consumers. On February 2, the company declared a 5% hike in its quarterly dividend to $0.27 per share. Through this increase, the company stretched its dividend growth streak to 56 years. The stock's dividend yield on March 11 came in at 2.05%.
As of the close of Q4 2023, 18 hedge funds in Insider Monkey's database reported having stakes in Commerce Bancshares, Inc. (NASDAQ:CBSH), which remained unchanged from the previous quarter. These stakes are collectively valued at roughly $89 million.
AbbVie Inc. (NYSE:ABBV) is an American pharmaceutical company that focuses on developing and commercializing advanced therapies to address various medical conditions. On February 15, the company declared a quarterly dividend of $1.55 per share, which fell consistent with its previous dividend. Overall, the company has raised its dividends for 51 years in a row. The stock offers a dividend yield of 3.45%, as of March 11.
With a collective stake value of over $3.5 billion, 76 hedge funds tracked by Insider Monkey held positions in AbbVie Inc. (NYSE:ABBV) at the end of Q4 2023, up from 73 in the previous quarter. Among these hedge funds, Marshall Wace LLP was the company's leading stakeholder in Q4.
Illinois Tool Works Inc. (NYSE:ITW) is a diversified manufacturing company that produces a wide range of industrial products and equipment. The company was a part of 36 hedge fund portfolios at the end of Q4 2023, up from 34 in the previous quarter, as per Insider Monkey's database. The stakes owned by these funds have a collective value of more than $1.2 billion.
Illinois Tool Works Inc. (NYSE:ITW), one of the best dividend kings on our list, has been growing its dividends for the past 51 consecutive years. The company pays a quarterly dividend of $1.40 per share and has a dividend yield of 2.14%, as of March 11. Over the past five years, the company has raised its dividend at an annual average rate of 8.77%.
Stepan Company (NYSE:SCL) is an Illinois-based chemical manufacturing company that produces a wide range of related products for its consumers. The company offers a quarterly dividend of $0.375 per share, having raised it by 3% in October 2023. This increase marked the company's 56th consecutive annual dividend hike, which makes SCL one of the best dividend kings on our list. As of March 11, the stock has a dividend yield of 1.69%.
Insider Monkey's database of Q4 2023 indicated that 9 hedge funds owned stakes in Stepan Company (NYSE:SCL), compared with 12 in the previous quarter. These stakes have a collective value of over $10 million. First Eagle Investment Management owned the largest stake in the company.
American States Water Company (NYSE:AWR) is an electric utility and water company, headquartered in California, US. The company provides water and electric services to residential, commercial, industrial, and military customers across the country. Its quarterly dividend comes in at $0.43 per share for a dividend yield of 2.33%, as of March 11. It is one of the best dividend kings on our list with 69 consecutive years of dividend growth under its belt.
The number of hedge funds tracked by Insider Monkey holding stakes in American States Water Company (NYSE:AWR) grew to 21 in Q4 2023, from 16 in the previous quarter. These stakes are worth over $52.5 million in total.
5-Year Average Annual Dividend Growth Rate: 11.51%
Target Corporation (NYSE:TGT) ranks sixth on our list of the best dividend stocks with a 5-year average annual dividend growth rate of 11.51%. The American retail corporation currently pays a quarterly dividend of $1.10 per share and has been growing its dividends for the past 52 consecutive years. With a dividend yield of 2.62% as of March 11, TGT is one of the best dividend kings on our list.
At the end of the fourth quarter of 2023, Target Corporation (NYSE:TGT) was included in 58 hedge fund portfolios, which remained unchanged from the previous quarter. The stakes owned by these hedge funds have a total value of more than $1.5 billion. With roughly 3 million shares, Diamond Hill Capital was the company's largest stakeholder in Q4.
