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In this article, we discuss 25 best stocks for dividends. You can skip our detailed analysis of dividend investments and their performance over the years, and go directly to read 10 Best Stocks For Dividends.
Income-generating stocks that allow regular and passive income are usually investors’ top choices in inflationary environments. In this regard, the dividend investment strategy is the most popular among investors as it allows them to invest in companies that pay out regular dividends. These equities offer stable income to shareholders with the potential for capital appreciation. Reinvested dividends, especially those that grow year over year, are an important way to generate compounding returns over time.
The contribution of dividend stocks to the overall market’s return dates back to the early 1800s. According to a study conducted by Dr. Robert Arnott, dividends were the main source of returns from 1802 to 2002, significantly outpacing inflation and other asset classes. During this period, US equities delivered an average return of 7.9%, with dividends representing 5% and real dividend growth accounting for 0.8% of the total return. They remained crucial to the overall market returns in the most recent years. Previously, we reported that compounded dividends represented over 70% of global equity returns since 1970.
Analysts also advise investing in dividend stocks because high-interest rates period make the preservation of capital more important for investors. Last year’s returns also show the prominence of dividend stocks over their peers. The S&P 500 High Dividend Index fell by 1.11% including payouts in 2022, compared with an 18% decline in the S&P 500. During the year, the S&P 500 Non-Dividend Payers fell by 21.1%.
Jamie Hopkins, managing partner of wealth solutions at Carson Wealth, spoke to Fortune about income investing in March. Here are some comments from the analyst:
“To achieve that steady stream of income, investors will build a portfolio with securities and assets like bonds, dividend-paying stocks, and real estate. There is no exact formula to income investing, and there are a lot of ways to add income-generating assets to your portfolio.”
Companies like McDonald’s Corporation (NYSE:MCD), Hormel Foods Corporation (NYSE:HRL), and Roper Technologies, Inc. (NYSE:ROP) are popular among investors due to their long dividend growth track records. In addition to this, these companies have strong cash flow generation that promises further dividend growth. To get more information about dividend growers, readers can have a look at 12 Dividend Kings To Buy For Safe Dividend Growth.
In this article, we will discuss the 25 best stocks for dividends.
Photo by nick chong on Unsplash
Our Methodology:
For this list, we scoured through several credible and expert sources, including Forbes, Morningstar, Barron's, and Business Insider, and identified their consensus picks from their recent articles. We also measured hedge fund sentiment around each stock, according to Insider Monkey's database for Q4 2022. The stocks are ranked in ascending order of the number of hedge funds having stakes in the companies.
25 Best Stocks For Dividends
25. Federal Realty Investment Trust (NYSE:FRT)
Number of Hedge Fund Holders: 16
Federal Realty Investment Trust (NYSE:FRT) is an American real estate investment trust company that mainly invests in shopping centers. The company reported strong Q4 results and was lauded by Wall Street analysts following its earnings. In February, Credit Suisse maintained an Overweight rating on the stock with a $127 price target.
Federal Realty Investment Trust (NYSE:FRT) is one of the best dividend stocks on our list as it holds the longest dividend growth track record in the REIT sector. The company has raised its payouts for 55 years in a row. It currently pays a quarterly dividend of $1.08 per share and has a dividend yield of 4.67%, as of March 25. Other popular dividend stocks include McDonald’s Corporation (NYSE:MCD), Hormel Foods Corporation (NYSE:HRL), and Roper Technologies, Inc. (NYSE:ROP).
At the end of Q4 2022, 16 hedge funds tracked by Insider Monkey owned stakes in Federal Realty Investment Trust (NYSE:FRT), worth over $75.7 million collectively.
24. Mid-America Apartment Communities, Inc. (NYSE:MAA)
Number of Hedge Fund Holders: 23
Mid-America Apartment Communities, Inc. (NYSE:MAA) is a publicly traded real estate investment trust that invests in apartments and owns over 300 apartment communities. On March 21, the company declared a quarterly dividend of $1.40 per share, which fell in line with its previous dividend. It is among the best dividend stocks on our list as it has been raising its dividends for 12 years. The stock's dividend yield on March 25 came in at 3.91%.
Barclays mentioned Mid-America Apartment Communities, Inc. (NYSE:MAA) in its March investors' note, highlighting the strong rent growth outlook for 2023. Given this, the firm raised its price target on the stock to $192 with an Overweight rating on the shares.
At the end of December, 23 hedge funds tracked by Insider Monkey reported having stakes in Mid-America Apartment Communities, Inc. (NYSE:MAA), with a total value of over $323 million.
Carillon Tower Advisers mentioned Mid-America Apartment Communities, Inc. (NYSE:MAA) in its Q3 2022 investor letter. Here is what the firm has to say:
“Mid-America Apartment Communities, Inc. (NYSE:MAA) Communities is a REIT that owns, develops, acquires, and operates multi-family apartment communities in the Sunbelt region of the U.S. In recent quarters, its results have benefited from significant lease rate increases, but investors have begun to anticipate a deceleration as monetary policy takes aim at inflation.”
23. Illinois Tool Works Inc. (NYSE:ITW)
Number of Hedge Fund Holders: 34
An American manufacturing company, Illinois Tool Works Inc. (NYSE:ITW) is next on our list of the best dividend stocks. The company was a popular stock among elite funds in Q4 2022, as 34 funds in Insider Monkey's database owned stakes in the company, up from 27 in the previous quarter. The collective value of these stakes is over $1.04 billion.
Illinois Tool Works Inc. (NYSE:ITW) currently pays a quarterly dividend of $1.31 per share for a dividend yield of 2.26%, as of March 25. The company maintains a 50-year streak of consistent dividend growth and has raised its dividends at an annual average rate of 10.09% in the past five years.
Appreciating Illinois Tool Works Inc. (NYSE:ITW)'s strong revenue growth, operating profits, and margins, UBS raised its price target on the stock to $245 in February with a Neutral rating on the shares.
22. International Business Machines Corporation (NYSE:IBM)
Number of Hedge Fund Holders: 43
International Business Machines Corporation (NYSE:IBM) is a New York-based multinational tech company that provides IT services and products to its consumers. On January 31, the company announced a quarterly dividend of $1.35 per share, which was consistent with its previous dividend. It has been rewarding shareholders with 27 years of growing dividends. The stock has a dividend yield of 5.27%, as recorded on March 25.
International Business Machines Corporation (NYSE:IBM) remained committed to its shareholder return in FY22. The company returned $5.9 billion to shareholders in dividends throughout the year, which was smoothly covered within its free cash flow of $9.3 billion. Its strong cash flow and consecutive dividend growths make it one of the best dividend stocks on our list.
At the end of Q4 2022, 43 hedge funds tracked by Insider Monkey reported owning stakes in International Business Machines Corporation (NYSE:IBM), up from 40 in the previous quarter. These stakes have a collective value of $1.23 billion. Among these hedge funds, Citadel Investment Group was the company's leading stakeholder in Q4.
21. Dow Inc. (NYSE:DOW)
Number of Hedge Fund Holders: 45
Dow Inc. (NYSE:DOW) is a Michigan-based chemicals company that provides sustainable packaging and consumer care solutions. The company currently offers a quarterly dividend of $0.70 per share and has a dividend yield of 5.41%, as of March 25. It is one of the best dividend stocks on our list as the company has been making regular dividend payments since 1912.
Deutsche Bank upgraded Dow Inc. (NYSE:DOW) to Buy in March with a $60 price target. The firm mentioned that the stock offers an 'attractive entry point' at current levels.
According to Insider Monkey's database, 45 hedge funds owned stakes in Dow Inc. (NYSE:DOW) in Q4 2022, up from 43 in the previous quarter. The collective value of these stakes is over $1.1 billion. With over 10.5 million shares, Pzena Investment Management was the company's leading stakeholder in Q4.
20. Altria Group, Inc. (NYSE:MO)
Number of Hedge Fund Holders: 45
Altria Group, Inc. (NYSE:MO) is an American tobacco company, based in Virginia. The company specializes in the production and manufacturing of cigarettes and related products. In February, Citigroup raised its price target on the stock to $49.50 and maintained a Neutral rating on the shares, appreciating the company's overall performance.
Altria Group, Inc. (NYSE:MO) returned over $6.6 billion to shareholders in dividends in FY22, which places it as one of the best dividend stocks on our list. Moreover, the company has raised its payouts consistently for the past 53 years. It currently offers a quarterly dividend of $0.94 per share and has a dividend yield of 8.55%, as of March 25.
At the end of Q4 2022, 45 hedge funds tracked by Insider Monkey reported owning stakes in Altria Group, Inc. (NYSE:MO), compared with 47 in the previous quarter. These stakes have a total value of over $1.8 billion.
Broyhill Asset Management mentioned Altria Group, Inc. (NYSE:MO) in its Q4 2022 investor letter. Here is what the firm has to say:
“We rebalanced our tobacco exposure during the year, reducing our investment in Altria Group, Inc. (NYSE:MO) as the future of the company’s combustible cigarette business became increasingly questionable given pending US legislation and a lackluster portfolio of reduced risk products. We reinvested the proceeds in Philip Morris so that relative position sizing is more consistent with our increased conviction.”
19. Philip Morris International Inc. (NYSE:PM)
Number of Hedge Fund Holders: 47
Philip Morris International Inc. (NYSE:PM) is an American multinational tobacco company, based in New York. On March 9, the company declared a quarterly dividend of $1.27 per share, which was consistent with its previous dividend. It has been raising its dividends consistently for the past 14 years. The stock's dividend came in at 5.60% on March 25.
UBS upgraded Philip Morris International Inc. (NYSE:PM) to Buy in March with a $116 price target, expecting growth in tobacco products in mature markets.
At the end of December 2022, 47 hedge funds tracked by Insider Monkey reported owning stakes in Philip Morris International Inc. (NYSE:PM), with a total value of over $6.2 billion.
Broyhill Asset Management mentioned Philip Morris International Inc. (NYSE:PM) in its Q4 2022 investor letter. Here is what the firm has to say:
“Philip Morris International Inc. (NYSE:PM) advanced 11% for the twelve months ending December 2022. After scratching our heads for years, we have to confess to feeling a little bit of pleasure watching some of the previous nonsense get their just deserts. When we first disclosed our investment in Philip Morris, we highlighted the gap between the “haves” and the “have nots” using the Horizons Marijuana Life Sciences Index, which had gained 140% in a few weeks, as an example. The top five stocks in this index generated $1.6B in sales in FY20 and traded at a combined $37.3B market capitalization or more than 23x sales. In contrast, Reduced Risk Products (RRPs) at Philip Morris (PM) generated over $6.8B in FY20 sales, which was less than 20x PM’s then $135 billion market capitalization. So one could have bought the top five marijuana companies that burned a cumulative $1.2 billion in trailing twelve-month free cash flow for 23x sales or bought Phillip Morris’ RRPs for less than 20x sales and got over $9 billion in free cash flow generated by their traditional business for free! Since then, the Horizons Marijuana Life Sciences Index went on to shed ~ 85% of its value while PM returned ~ 55% over the same period.”
18. Target Corporation (NYSE:TGT)
Number of Hedge Fund Holders: 48
Target Corporation (NYSE:TGT) is an American general merchandise retailer with stores all over the country. Roth MKM raised its price target on the stock to $158 with a Neutral rating on the shares, following the company's recent Q4 earnings.
Target Corporation (NYSE:TGT), one of the best dividend stocks on our list, has been raising its payouts consistently for the past 51 years. The company offers a quarterly dividend of $1.08 per share for a dividend yield of 2.77%, as of March 25.
The number of hedge funds tracked by Insider Monkey owning stakes in Target Corporation (NYSE:TGT) stood at 48 in Q4 2022. The collective value of these stakes is nearly $1.7 billion.
Madison Funds mentioned Target Corporation (NYSE:TGT) in its Q4 2022 investor letter. Here is what the firm has to say:
“Despite having already addressed excess inventories, Target Corporation (NYSE:TGT) reported a disappointing third quarter and further cut fourth quarter guidance. Although sales were slightly better than expected, Target saw a slowdown in discretionary sales. Gross margins were below expectations with higher markdowns, increased shrink, and incremental costs. Long-term, we expect Target to be able to return to operating margins in the 6% to 8% range as inventories return to normal levels as well as seeing a normalization in supply chain costs.”
17. Automatic Data Processing, Inc. (NASDAQ:ADP)
Number of Hedge Fund Holders: 49
Automatic Data Processing, Inc. (NASDAQ:ADP) is an American management services company, headquartered in New Jersey. The company was a part of 49 hedge fund portfolios in Q4 2022, up from 48 in the previous quarter, as per Insider Monkey's database. The stakes owned by these hedge funds have a collective value of over $3.52 billion.
Barclays maintained an Overweight rating on Automatic Data Processing, Inc. (NASDAQ:ADP) in January with a $278 price target, after the company posted strong quarterly earnings.
Automatic Data Processing, Inc. (NASDAQ:ADP) is one of the best dividend stocks on our list as it has a 48-year run of raising its dividends. The company currently offers a quarterly dividend of $1.25 per share and has a dividend yield of 2.34%, as of March 25.
Carillon Tower Advisers mentioned Automatic Data Processing, Inc. (NASDAQ:ADP) in its Q3 2022 investor letter. Here is what the firm has to say:
“Despite a difficult macroeconomic environment, hiring trends have remained robust and Automatic Data Processing, Inc. (NASDAQ:ADP) shares reacted positively to strong quarterly earnings and guidance that was well above consensus expectations.”
16. 3M Company (NYSE:MMM)
Number of Hedge Fund Holders: 52
3M Company (NYSE:MMM) is an American multinational company that offers services in a wide range of industries. On February 7, the company declared a 0.7% hike in its quarterly dividend to $1.50 per share. Through this increase, the company took its dividend growth streak to 65 years. As of March 25, the stock has a dividend yield of 5.93%. It is among the best dividend stocks on our list.
As per Insider Monkey's Q4 2022 database, 52 hedge funds owned stakes in 3M Company (NYSE:MMM), up from 49 in the previous quarter. These stakes have a collective value of over $1.57 billion. Ken Griffin, Cliff Asness, and Jack Woodruff were some of the company's leading stakeholders in Q4.
15. Lockheed Martin Corporation (NYSE:LMT)
Number of Hedge Fund Holders: 53
Lockheed Martin Corporation (NYSE:LMT) is a Maryland-based aerospace company that deals in arms, defense, and information security. In February, Credit Suisse double-upgraded the stock to Outperform in February and also lifted its price target on the stock to $510. The firm appreciated that the company has reported three consecutive quarters with a growing book-bill ratio.
Lockheed Martin Corporation (NYSE:LMT), one of the best dividend stocks, currently pays a per-share dividend of $3.00 every quarter. In 2022, the company took its dividend growth streak to 20 years. The stock has a dividend yield of 2.53%, as of March 25.
At the end of Q4 2022, 53 hedge funds tracked by Insider Monkey owned stakes in Lockheed Martin Corporation (NYSE:LMT), the same as in the previous quarter. The collective value of these stakes is over $2.13 billion.
Vltava Fund mentioned Lockheed Martin Corporation (NYSE:LMT) in its Q3 2022 investor letter. Here is what the firm has to say:
“LMT is one of the world’s largest aerospace and defence companies. The war in Ukraine has reminded investors and the wider public just how important these companies are. The aerospace and defence industry in the USA is an established oligopoly. This means that a few large firms play a dominant role. While collectively they comprise an oligopoly, individually they often have monopoly positions in particular narrower segments. Their main counterparty is the US government, a key customer in what is known as a monopsonist position. This is a rather unusual situation, but one that is very advantageous for companies such as LMT. (Click here to see the full text)
14. Devon Energy Corporation (NYSE:DVN)
Number of Hedge Fund Holders: 55
Devon Energy Corporation (NYSE:DVN) is an Oklahoma-based energy company that specializes in the exploration of hydrocarbons. It offers a quarterly dividend of $0.20 per share and has a dividend yield of 10.87%, as of March 25.
Following the company's Q4 earnings, Barclays maintained an Equal Weight rating on Devon Energy Corporation (NYSE:DVN) in March with a $67 price target.
At the end of December 2022, 55 hedge funds owned stakes in Devon Energy Corporation (NYSE:DVN), up from 51 in the previous quarter, according to Insider Monkey's data. The stakes are valued at $823.5 million collectively.
GoodHaven Capital Management mentioned Devon Energy Corporation (NYSE:DVN) in its Q2 2022 investor letter. Here is what the firm has to say:
“Our biggest dollar gainer within this period was Devon Energy Corporation (NYSE:DVN), a position which emanated from a takeover in early 2021 of our long time holding WPX Energy. We are sitting on a material (unrealized) gain from our cost and are now receiving material dividends thanks to Devon’s thoughtful fixed/variable dividend policy. Energy is now a hot sector for investors but we have had a material exposure for a long time. We remember a bit too well $40 oil, NEGATIVELY PRICED front-month oil contract, and what it’s like to own a company with leverage and negative free cash flow during such periods. Our desire to have our biggest portfolio exposures be high return, growing, reasonably predictable and moderately levered companies lead us to reduce our Devon exposure in the past. When the recent facts and circumstances for the industry changed and appeared supportive of healthy oil prices, we decided to maintain a sizable holding and more recently added to the position. At Devon’s Q1 dividend rate, which is mostly variable in nature, the shares now yield approximately 10% and our yield on our average cost is materially higher. In addition, we maintain additional energy exposure through our long-term (and successful) holding in Hess Midstream and less directly through TerraVest and Berkshire Hathaway’s energy investments.”
13. Pioneer Natural Resources Company (NYSE:PXD)
Number of Hedge Fund Holders: 55
Pioneer Natural Resources Company (NYSE:PXD) is an American independent oil and natural gas exploration and production company. The company is one of the best dividend stocks on our list as it returned over $8 billion to shareholders in dividends in FY22. It currently pays a quarterly dividend of $5.58 per share and has a dividend yield of 14.17%, as of March 25.
Citigroup upgraded Pioneer Natural Resources Company (NYSE:PXD) to Buy in March and also raised its price target on the stock to $210. The firm called the company one of its top picks in the sector.
The number of hedge funds tracked by Insider Monkey owning stakes in Pioneer Natural Resources Company (NYSE:PXD) grew to 55 in Q4 2022, from 49 a quarter earlier. These stakes have a consolidated value of roughly $842 million. Among these hedge funds, Citadel Investment Group was the company's leading stakeholder in Q4.
12. Verizon Communications Inc. (NYSE:VZ)
Number of Hedge Fund Holders: 56
An American telecommunications company, Verizon Communications Inc. (NYSE:VZ) is next on our list of the best dividend stocks. In March, BofA maintained a Neutral rating on the stock with a $41 price target. The firm mentioned that the company's core business is 'solid' and its dividend is 'sustainable'.
On March 2, Verizon Communications Inc. (NYSE:VZ) declared a quarterly dividend of $0.6525 per share, which fell in line with its previous dividend. The company maintains a 16-year streak of dividend growth, which places it as one of the best dividend stocks on our list. The stock has a dividend yield of 6.93%, as reported on March 25.
At the end of Q4 2022, Verizon Communications Inc. (NYSE:VZ) was a part of 56 hedge fund portfolios, as per Insider Monkey’s data. The stakes owned by these funds have a total value of over $1.5 billion.
Mawer Investment Management mentioned Verizon Communications Inc. (NYSE:VZ) in its Q3 2022 investor letter. Here is what the firm has to say:
“There are a few other segments of our portfolios that displayed weakness in the quarter. Cable and telecommunication companies have been an area that has lagged the broader market as their worlds are increasingly colliding. Companies such as Verizon (NYSE:VZ) has been impacted as wireless operator is spending heavily to attract internet subscribers with fixed wired access and the cable companies are trying to build wireless businesses.”
11. The Coca-Cola Company (NYSE:KO)
Number of Hedge Fund Holders: 58
The Coca-Cola Company (NYSE:KO), an American beverage company, holds one of the longest dividend growth track records of 61 years. The company currently offers a quarterly dividend of $0.46 per share and has a dividend yield of 3.02%, as of March 25. In addition to KO, income investors are also paying attention to McDonald’s Corporation (NYSE:MCD), Hormel Foods Corporation (NYSE:HRL), and Roper Technologies, Inc. (NYSE:ROP).
In FY22, The Coca-Cola Company (NYSE:KO) generated over $9.5 billion in free cash flow, which was sufficient to cover its dividend payments worth $7.6 billion. The company's strong cash position and dividend growth streak make it one of the best dividend stocks on our list.
At the end of Q4 2022, 58 hedge funds in Insider Monkey's database reported having stakes in The Coca-Cola Company (NYSE:KO). These stakes have a consolidated value of $28.8 billion.
Rowan Street Capital mentioned The Coca-Cola Company (NYSE:KO) in its Q4 2022 investor letter. Here is what the firm has to say:
“Let’s take The Coca-Cola Company (NYSE:KO) for example. Its dividend yield is 2.8%, earnings are estimated to grow at only 3.6% rate per year over next 4 years, and its earnings multiple is currently at 24x (based on next years forecasted earnings). KO has an anemic growth, so we can argue that paying 24x earnings is not very attractive. Let’s assume that the multiple will stay constant over the next 3-5 years, thus our expected annual returns will be 2.8%+3.6% = 6.4% (that is below the current reported inflation rate and only slightly above the risk-free rate of 4%).”
Click to continue reading and see 10 Best Stocks For Dividends.
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Disclosure. None. 25 Best Stocks For Dividends is originally published on Insider Monkey.