We recently compiled a list of the 15 Best S&P 500 Dividend Stocks to Buy Now.In this article, we are going to take a look at where JPMorgan Chase & Co. (NYSE:JPM) stands against the other stocks.
Stock market investors have enjoyed strong annual returns over the past two years, but analysts caution that 2025 may not deliver a repeat performance. In 2024, the broader market posted a 23% gain, following a 24% increase in 2023. When factoring in dividends, total returns for those years reached 25% and 26%, respectively. However, such sustained high returns are uncommon. According to Scott Wren, senior global market strategist at the Wells Fargo Investment Institute, US stocks have only recorded three consecutive years of 20%-plus total returns once since 1928, during the late 1990s.
Analysts do not expect the market’s strong run to persist this year. A report from Morgan Stanley points out that while the third year of a bull market tends to deliver only modest returns on average, it is usually not negative.
The report mentioned that one possible scenario for 2025 is that earnings-per-share growth outpaces market gains, leading to a decline in overall price-to-earnings valuations. Factors such as prolonged high interest rates and geopolitical uncertainties could contribute to a lackluster year, causing some of the recent optimism to fade. However, if this happens, the market could regain momentum in 2026, making 2025 more of a temporary pause rather than a deeper downturn.
Dividends are a key component of the investment market, with nearly 80% of companies in the broader market distributing payments to shareholders. However, maintaining steady dividend increases is a difficult achievement. Only about 13% of companies in the index qualify for the Dividend Aristocrats Index, which includes corporations that have raised their dividends for at least 25 consecutive years. Investors are often drawn to dividend growth stocks, as they have demonstrated strong long-term performance, especially during times of elevated interest rates.
According to data from Abrdn, it was noted that between December 2002 and December 2022, companies that either increased or initiated dividends achieved a compounded return of 10.68%. In contrast, firms that reduced or discontinued their dividends saw a significantly lower return of 2.70%. In addition, it was highlighted that companies not paying dividends also lagged behind dividend growers, generating a return of 9.25% over the same timeframe.
When assessing the reliability of dividend stocks, analysts suggest that investors should emphasize dividend growth rather than being lured by high yields that may not be sustainable. Dan Lefkovitz, a strategist with Morningstar’s Index team, underscored the significance of dividend growth as a strategy distinct from high-yield investing. He pointed out that companies with consistent dividend growth often have strong competitive advantages and promising future outlooks. A portfolio focused on dividend growth generally mirrors the broader market in terms of sector allocation and the balance between growth and value characteristics, including price-to-earnings ratios. While it leans toward a value-driven approach, it remains more balanced and core-oriented compared to portfolios concentrated on high-yield stocks.
Although dividend stocks did not experience the same level of gains as tech stocks in 2024, they still delivered impressive returns. That year, companies across the broader market that distributed dividends returned approximately 35% of their net income and 45% of their free cash flow to shareholders, according to Bloomberg. On average, these companies had a dividend yield of around 2.3%, while the market capitalization-weighted yield was about 1.5%. Given this, we will take a look at some of the best dividend stocks in the broader market.
Our Methodology
For this list, we scanned the list of the companies in the broader market and picked dividend stocks with dividend yields of about 2%, as of February 27. From that list, we picked 15 dividend stocks with the highest number of hedge fund investors, according to Insider Monkey’s database of over 1,000 hedge funds, as of Q4 20234. The stocks are ranked in ascending order of the number of hedge funds having stakes in them.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
Is JPMorgan Chase & Co. (JPM) the Best Affordable Dividend Stock to Buy According to Hedge Funds?
A group of business people discussing plans around a boardroom table adorned with a financial services company logo.
JPMorgan Chase & Co. (NYSE:JPM) is an American multinational financial services company that offers services in commercial banking, financial transaction processing, and asset management. In 2024, the bank achieved record-breaking financial results, with annual revenue exceeding $177 billion and net income surpassing $58 billion. Both figures reflected strong double-digit growth from the previous year, with revenue increasing by 12% and profitability rising by 18%.
These milestones were largely driven by growth across all three of its primary business divisions. The core Consumer and Community Banking unit saw a 2% increase from 2023, while the Commercial and Investment Banking and Asset and Wealth Management segments each posted a solid 9% gain.
JPMorgan Chase & Co. (NYSE:JPM) has established itself as a leading dividend stock, maintaining consistent payouts since 1972. In the latest quarter, the company reinforced its commitment to shareholder returns by distributing $3.5 billion in dividends. Its quarterly dividend comes in at $1.25 per share and has a dividend yield of 1.9%, as of February 27.
JPMorgan Chase & Co. (NYSE:JPM) has also built up a substantial reserve of excess capital, amounting to approximately 10% of its market capitalization, while maintaining a disciplined approach to capital management. Although share repurchases have not been a primary focus, the company still bought back $6.36 billion worth of stock in Q3 2024. As economic conditions improve, it is expected to gradually reduce its cash reserves and enhance capital returns to shareholders.
Overall JPM ranks 1st on our list of the best S&P 500 dividend stocks to buy now. While we acknowledge the potential for JPM as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than JPM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
