We recently compiled a list of the 10 Top Performing Dividend Stocks in 2024. In this article, we are going to take a look at where Oracle Corporation (NYSE:ORCL) stands against the other top performing dividend stocks in 2024.
Over time, dividend stocks have shown consistent resilience in difficult market conditions. Despite the recent focus on AI, the long-term appeal of these stocks has grown. Income investors have noticed this shift, reflected in the increasing role of dividends in personal income. A report by S&P Dow Jones Indices reveals that the share of dividend income has risen from 2.68% in the fourth quarter of 1980 to 7.88% in the second quarter of 2024, emphasizing the importance of dividends as a key income source. The report also noted that since 1936, dividends have accounted for more than a third of total equity returns in the broader market, with the rest coming from capital gains.
The dividend growth strategy seems to be working for long-term investors as these stocks have generated strong returns over the years. Considering inflation, dividends have outpaced it, suggesting that investors should focus on these stocks. A report by Wisdom Tree highlighted that from 1957 to 2023, dividends grew at an average annual rate of 5.7%, which is over 2% higher than the inflation rate. The report also pointed out that dividends have only decreased in six years during the past 64 years, and only once by more than 5%. In comparison, stock prices fell in 18 of those years, with the worst decline exceeding 40% and an average drop of over 11%. Stock prices were more than twice as volatile as dividend cash flows, as short-term price movements are more influenced by market sentiment, while long-term value is driven by the stability of cash flows.
This year, dividend stocks have underperformed compared to the broader market. The Dividend Aristocrat Index has gained only 6% year-to-date, while the market has surged by over 27%. Although this might seem discouraging for dividend investors, seasoned investors recognize that this presents a great opportunity to buy dividend stocks. Chris O’Keefe, a portfolio manager at Logan Capital Management, pointed out that the widening performance gap between the market and dividend stocks in 2024 creates an ideal time for investors to consider these equities. Along with O'Keefe, many analysts are encouraging investors to focus on dividend stocks due to their favorable outlook. The Dividend Aristocrats index has struggled to keep pace with the market since 2020. Dividend stocks saw a brief resurgence in 2022 as recession concerns led investors to seek out stable sectors like utilities and consumer goods, but the recovery was short-lived. By 2023, rising interest rates made bond and money-market returns more attractive than dividend yields, causing companies to adopt a more cautious stance and conserve cash amid economic uncertainty. This year, many of the top-performing stocks from the COVID era have once again driven the market to new highs.
Despite underperforming for the past two consecutive years, analysts remain optimistic about dividend stocks. They believe that dividend-paying equities could see a resurgence in 2025, as investors are increasingly seeking cash returns. The broader market’s dividend yield recently dropped to a 20-year low, falling below 1.19%, significantly lower than the long-term historical average of 4.3%. With interest rates rising on risk-free investments like Treasuries, companies are recognizing the growing competition for yield. As a result, many are responding by increasing dividends or introducing them for the first time. Notably, several major technology companies began paying dividends in 2024, signaling to the market that they are positioning themselves as value plays within a high-growth sector.
Is Oracle Corporation (ORCL) the Best Edge Computing Stock to Invest in According to Analysts?
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Our Methodology
For this article, we first used a stock screener to identify stocks that have reported positive returns in 2024 so far. From this selection, we chose dividend stocks with the highest year-to-date (YTD) as of December 25. The stocks were then arranged in ascending order of their YTD gains. We also considered hedge fund sentiment around each stock using Insider Monkey’s data for Q3 2024.
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 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
Oracle Corporation (NYSE:ORCL) is an American software company, based in Texas. The company is mainly known for its top-notch data center infrastructure crucial to AI development and is facing demand that exceeds its current supply. The company's efficient operations have made it a preferred partner for leading AI startups, such as OpenAI, Cohere, and Elon Musk’s xAI. Despite these efforts, Oracle is still struggling to meet the high demand, with 162 data centers either operational or under construction as of the first quarter of fiscal 2025. To address this challenge, the company plans to significantly expand, aiming to grow its data center network to between 1,000 and 2,000 in the future. The stock has surged by nearly 65% since the start of 2024, which makes it one of the best performing stocks on our list.
Oracle Corporation (NYSE:ORCL) reported strong earnings in fiscal Q2 2025, with revenue totaling $14.06 billion, a 9% increase compared to the same period last year. Cloud revenue, which includes both Infrastructure-as-a-Service (IaaS) and Software-as-a-Service (SaaS), reached $5.9 billion, reflecting a 24% growth in both USD and constant currency. Within this segment, cloud infrastructure revenue (IaaS) amounted to $2.4 billion, marking an impressive 52% increase in both USD and constant currency. Oracle's cloud revenue is expected to surpass $25 billion for the current fiscal year.
“Oracle Corporation (NYSE:ORCL) announced second-quarter results that exceeded consensus expectations, driven by growth in its cloud infrastructure business, which is benefiting from demand for AI applications. Investor sentiment was further bolstered by the company’s announcement of a new partnership with Amazon.”
Oracle Corporation (NYSE:ORCL) has a strong cash position which supports its dividend payments. The company has paid regular dividends to shareholders since 2009. Over the last 12 months, its operating cash flow was $20.3 billion and its free cash flow during this period amounted to $9.5 billion. It offers a quarterly dividend of $0.40 per share and has a dividend yield of 0.93%, as of December 25.
Of the 900 hedge funds tracked by Insider Monkey at the end of Q3 2024, 91 funds held stakes in Oracle Corporation (NYSE:ORCL), compared with 93 in the preceding quarter. These stakes are collectively valued at over $7 billion. Among these hedge funds, Ken Fisher's Fisher Asset Management was the company's leading stakeholder in Q3.
Overall, ORCL ranks 5th on our list of the best performing dividend stocks in 2024. While we acknowledge the potential for ORCL to grow, 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 ORCL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
