In this article, we discuss 16 best passive income stocks to buy according to hedge funds. You can skip our detailed analysis of dividend stocks and their previous performance, and go directly to read 5 Best Passive Income Stocks To Buy According to Hedge Funds.
According to a recent survey by the investment platform Magnifi, 49% of Americans engage in investing to secure additional income, a figure that surpasses the 42% who invest specifically for retirement.
Investing in dividend stocks is a popular method for generating passive income. This is largely due to the substantial contribution these stocks make to overall market returns over extended periods. Data from 1926 to July 2023 indicates that dividend income constituted 32% of the monthly total return of the S&P 500, with the remainder attributed to capital appreciation. Moreover, dividends have demonstrated resilience during periods of high inflation. According to a report by S&P Dow Jones Indices, in decades marked by significant inflation, such as the 1940s and 1970s, dividend income accounted for more than half of the total return.
According to a study conducted by Wisdom Tree, dividend-paying stocks have been highlighted as capable of producing significant levels of income. The report indicated that by emphasizing dividends, investors can substantially enhance their dividend earnings and potentially raise the trailing 12-month dividend yield. This strategy becomes particularly valuable in times of low yields and returns, marked by market volatility and uncertainty. Investing in dividend-weighted indexes could offer investors a means to generate essential income in such challenging environments.
Experienced investors, along with regular investors, stress the significance of including dividend-paying stocks in investment portfolios to ensure a steady income stream. Brian Bollinger, the president of Simply Safe Dividends, discussed the role of dividends in generating income during an interview with CNBC. He suggested that for those seeking genuinely passive income, dividend investing is a viable option. While relying on dividends for income is a common practice for retirees or those approaching retirement age, Bollinger emphasized that anyone can construct a portfolio focused on generating income from equities. He further highlighted the importance of building a source of income independent of traditional paychecks.
Broadcom Inc. (NASDAQ:AVGO), Walmart Inc. (NYSE:WMT), and Exxon Mobil Corporation (NYSE:XOM) are some of the most prominent dividend stocks as these companies have a proven track record of consistently increasing their dividends over the years, making them reliable options for shareholders looking to generate income passively. In this article, we will discuss some other best dividend stocks for passive income.
16 Best Passive Income Stocks To Buy According to Hedge Funds
For this list, we first used a stock screener to pick companies that have raised their dividends for at least 10 consecutive years or more. From that list, we narrowed down our options to companies with dividend yields of at least 1% as of March 20, demonstrating robust financial standings and consistent cash flow, which are indicative of their ability to sustain reliable dividends for passive income. From these companies we picked 16 stocks with the highest number of hedge fund investors, using Insider Monkey's database of 933 hedge funds and their holdings. 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).
Lowe's Companies, Inc. (NYSE:LOW) is an American retailer that specializes in home improvement products. The company offers a quarterly dividend of $1.10 per share and has a dividend yield of 1.76%, as of March 20. It has been growing its dividends for the past 59 consecutive years. Moreover, the company remained committed to its shareholder return, paying approximately $2.5 billion in dividends in FY23, which makes LOW one of the best dividend stocks for passive income.
The number of hedge funds tracked by Insider Monkey owning stakes in Lowe's Companies, Inc. (NYSE:LOW) grew to 68 in Q4 2023, from 63 in the previous quarter. The collective value of these stakes is over $3.7 billion.
Philip Morris International Inc. (NYSE:PM) operates as an international tobacco company engaged in the manufacture and sale of cigarettes and other tobacco products in markets outside of the US. On March 7, the company announced a quarterly dividend of $1.30 per share, which fell in line with its previous dividend. It is one of the best dividend stocks for passive income as the company has raised its payouts for 14 years in a row. The stock's dividend yield on March 20 came in at 5.56%.
At the end of Q4 2023, 68 hedge funds in Insider Monkey's database reported having stakes in Philip Morris International Inc. (NYSE:PM), up from 62 in the previous quarter. The total value of these stakes is more than $5.5 billion. With over 15 million shares, Fundsmith LLP was the company's leading stakeholder in Q4.
NIKE, Inc. (NYSE:NKE) is an Oregon-based multinational corporation that designs, develops, markets, and sells athletic footwear, apparel, equipment, accessories, and services. In the most recent quarter, the company returned $523 million to shareholders through dividends. In addition to this, it maintains a 22-year streak of consistent dividend growth, which makes NKE one of the best dividend stocks for passive income. The company's quarterly dividend comes in at $0.37 per share for a dividend yield of 1.49%, as of March 20.
As of the close of Q4 2023, 69 hedge funds tracked by Insider Monkey owned stakes in NIKE, Inc. (NYSE:NKE), which remained unchanged from the previous quarter. The collective worth of these stakes is over $3.53 billion.
An American multinational home improvement company, The Home Depot, Inc. (NYSE:HD) is next on our list of the best dividend stocks for passive income. The company pays a quarterly dividend of $2.25 per share, having raised it by 7.7% in February this year. Through this increase, the company stretched its dividend growth streak to 14 years. As of March 20, the stock has a dividend yield of 2.36%.
At the end of December 2023, 70 hedge funds in Insider Monkey's database held stakes in The Home Depot, Inc. (NYSE:HD), compared with 76 in the previous quarter. These stakes have a total value of roughly $6 billion. Among these hedge funds, Fisher Asset Management was the company's leading stakeholder in Q4.
The Procter & Gamble Company (NYSE:PG) is a multinational consumer goods corporation that operates in various sectors including health care, beauty, grooming, and household care. The company offers a quarterly dividend of $0.9407 per share and has a dividend yield of 2.33%, as of March 20. It holds one of the longest track records of dividend growth, spanning over 67 years. PG is one of the best dividend stocks on our list for passive income.
Insider Monkey's database of Q4 2023 indicated that 71 hedge funds owned stakes in The Procter & Gamble Company (NYSE:PG), down from 75 in the previous quarter. These stakes are worth nearly $6 billion in total.
Chevron Corporation (NYSE:CVX) is one of the world's largest multinational energy corporations, engaged in various aspects of the energy sector. The company was included in 71 hedge fund portfolios at the end of Q4 2023, compared with 72 in the previous quarter, according to Insider Monkey's database. The stakes held by these hedge funds have a total value of $21.6 billion.
Chevron Corporation (NYSE:CVX), one of the best dividend stocks for passive income, has been growing its dividends for the past 37 years consistently. The company offers a quarterly dividend of $1.63 per share and has a dividend yield of 3.37%, as of March 20.
Linde plc (NASDAQ:LIN) is a multinational industrial gases and engineering company that offers a wide range of products and services to various industries. Recently, the company declared a 9% hike in its quarterly dividend, which stretched its dividend growth streak to 29 years. It now offers a quarterly dividend of $1.39 per share for a dividend yield of 1.19%, as of March 20.
As of the end of the December quarter of 2023, 74 hedge funds owned stakes in Linde plc (NASDAQ:LIN), compared with 71 in the previous quarter. These stakes have a collective value of roughly $4 billion. Among these hedge funds, Scopus Asset Management was the company's leading stakeholder in Q4.
AbbVie Inc. (NYSE:ABBV) is next on our list of the best dividend stocks for passive income as the company has been rewarding shareholders with growing dividends for the past 51 years. The American multinational pharmaceutical company currently offers a quarterly dividend of $1.55 per share and has a dividend yield of 3.51%, as of March 20.
Insider Monkey's database of Q4 2023 showed that 76 hedge funds held stakes in AbbVie Inc. (NYSE:ABBV), growing from 73 in the preceding quarter. Their collective stake value is over $3.5 billion.
QUALCOMM Incorporated (NASDAQ:QCOM) is a leading multinational semiconductor and telecommunications equipment company. The company currently offers a quarterly dividend of $0.85 per share, growing it by 6.3% on March 5. This marked the company's 20th consecutive annual dividend hike, which makes QCOM one of the best dividend stocks for passive income. Moreover, it returned $895 million to shareholders through dividends during the first quarter of fiscal 2024. The stock's dividend yield on March 20 came in at 1.91%.
The number of hedge funds tracked by Insider Monkey holding stakes in QUALCOMM Incorporated (NASDAQ:QCOM) grew to 78 in Q4 2023, from 67 in the previous quarter. The consolidated value of these stakes is nearly $3 billion. With 3 million shares, Two Sigma Advisors was the company's leading stakeholder in Q4.
With 79 hedge funds tracked by Insider Monkey holding stakes in the company in Q4 2023, Pfizer Inc. (NYSE:PFE) is next on our list of the best dividend stocks for passive income. The number of funds has grown from 73 in the previous quarter and their collective stake value for the current quarter is over $2.2 billion.
The American multinational pharmaceutical company has been growing its dividends for the past 14 years and it currently offers a per-share dividend of $0.42 every quarter. The stock has a dividend yield of 6.06%, as of March 20.
Johnson & Johnson (NYSE:JNJ) ranks sixth on our list of the best dividend stocks for passive income. The multinational healthcare industry company has raised its payouts for 61 years in a row and offers a quarterly dividend of $1.19 per share. As of March 20, the stock has a dividend yield of 3.06%.
As of the end of Q4 2023, 81 hedge funds held stakes in Johnson & Johnson (NYSE:JNJ), compared with 84 in the previous quarter, as per Insider Monkey's database. The collective value of these stakes is roughly $4 billion. With over 6.3 million shares, Fisher Asset Management was the company's leading stakeholder in Q4.
