In this article, we will take a look at some of the best dividend stocks.
In 2024, several major tech companies surprised investors by announcing their first-ever dividend payments. Traditionally, technology firms reinvest billions annually to fuel growth, leading to the perception that they rarely distribute dividends. However, as more large-cap companies prioritize enhancing shareholder returns, a balanced approach—focusing on both income generation and stock appreciation—is increasingly becoming the norm. The market has been experiencing uncertainty in recent days, leaving investors concerned about its future direction. Given this unpredictability, a wise strategy is to consistently invest in high-quality dividend stocks when they are attractively priced, rather than attempting to time market fluctuations.
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An analysis of historical trends suggests that undervalued stocks have delivered stronger long-term returns. Research conducted by Eugene Fama of the University of Chicago and Kenneth French of Dartmouth College highlighted that stocks with lower price-to-book ratios outperformed the broader market index between 1963 and 1990, according to Oakmark Funds. Their findings also noted that growth investors often favored companies with exciting prospects, while value investors focused on more traditional, overlooked stocks. In the long run, value investors tended to see better results.
During the high-inflation environment of 2022, value stocks declined by 7%, whereas growth stocks saw a steeper drop of 28.6%. Furthermore, value stocks in the US posted their strongest relative performance against growth stocks since the dot-com crash of 2000.
Analysts suggest that value stocks tend to hold up relatively well during economic downturns. During recessions, investors often become more risk-averse and seek out stable, resilient investments, which frequently include value stocks. A report by GMO examined the performance of undervalued stocks during US recessions since 1969, using valuation metrics such as price-to-book, price-to-earnings, Composite Value, and a combination of value models within their Opportunistic Value strategies. While the firm does not recommend constructing portfolios based solely on traditional price-to-book or price-to-earnings ratios, the report found that even these simple metrics have historically performed fairly well during recessions. Notably, all value models—except price-to-book—delivered stronger returns during recessionary periods (including the COVID-19 downturn) than in non-recession months over the past 55 years.
Dividend stocks have underperformed in recent years, largely due to the rising hype surrounding AI-related investments. Despite this, analysts continue to favor dividend stocks for their strong long-term potential. Morningstar’s chief US market strategist, Dave Sekera, recently shared insights on their future outlook and current valuation. Here are some comments from the analyst:
“I’m really thinking that dividend stocks are a good place to be in the first half of the year, where you can at least capture some of those high dividends for the next couple of quarters. I also like that those stocks are going to be lower in duration. So if we do have interest rates continuing to climb, those would perform better. And of course, then we also have the unknowns of exactly what a Trump presidency is going to bring here in the first quarter and even into the second quarter. So I think that there is probably more downside risks of the market in the short term than upside risk. So therefore, I like a lot of these dividend stocks, which of course are more often than not in the value category.”
In view of this, we will take a look at some of the best dividend stocks.
Photo by Karolina Grabowska from Pexels
Our Methodology
To create this list, we screened for dividend stocks with a forward P/E ratio under 25, as of February 26. Then, we picked companies from that list that have a reliable history of paying dividends consistently to their shareholders. We ranked the resulting list based on the number of hedge fund investors who held stakes in these companies, as per the Q4 2024 data from Insider Monkey’s database.
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).
10. The Home Depot, Inc. (NYSE:HD)
Number of Hedge Fund Holders: 88
Forward P/E Ratio as of February 26: 24.88
The Home Depot, Inc. (NYSE:HD) is an American multinational home improvement retail corporation that offers related products and services to its consumers. The company operates in over 2,300 locations across North America and is influenced by shifts in the real estate market. While the company is known for its consistent growth and strong profitability, it has faced challenges due to high mortgage rates. These higher borrowing costs have led to a slowdown in home sales and a reduced number of properties on the market, ultimately impacting consumer spending on home improvement projects. The stock has surged modestly by just 0.52% since the start of 2025.
That said, The Home Depot, Inc. (NYSE:HD) recently reported strong fourth-quarter earnings for 2024, with revenue reaching $39.7 billion—an increase of more than 14% compared to the previous year. Looking ahead to fiscal 2025, it expects total sales growth of approximately 2.8%, with comparable sales expected to rise by about 1% over the equivalent 52-week period. In addition, the company plans to open around 13 new locations and forecasts a gross margin of approximately 33.4%.
The Home Depot, Inc. (NYSE:HD) closed the quarter with more than $1.65 billion in cash and cash equivalents. Throughout fiscal 2024, the company generated nearly $20 billion in operating cash flow. This strong financial position has enabled it to maintain uninterrupted dividend payments for 152 consecutive quarters. Additionally, the company announced a 2.2% increase in its quarterly dividend to $2.30 per share, marking its 15th consecutive year of dividend growth. As of February 26, the stock carries a dividend yield of 2.36%.
9. Merck & Co., Inc. (NYSE:MRK)
Number of Hedge Fund Holders: 91
Forward P/E Ratio as of February 26: 10.13
Merck & Co., Inc. (NYSE:MRK) is an American multinational pharmaceutical company, headquartered in New Jersey. The company offers innovative health solutions to its consumers. The stock has declined by nearly 10% since the start of 2025. The recent drop in stock price is primarily attributed to lower-than-expected revenue guidance for 2025. The company projected revenue between $64.1 billion and $65.6 billion, falling short of analysts’ expectations of $67.31 billion. Another factor impacting its outlook is the temporary suspension of Gardasil shipments to China, with deliveries expected to resume by mid-2025.
In the fourth quarter of 2024, Merck & Co., Inc. (NYSE:MRK) reported $15.6 billion in revenue, reflecting a 7% increase from the same period the previous year. The company has strengthened its leadership in specialty pharmaceuticals and oncology, with its flagship cancer treatment, Keytruda, playing a key role in transforming cancer care and driving substantial revenue growth. Strong market positioning has allowed Merck to generate significant cash flow, supporting shareholder returns. In fiscal 2024, Keytruda sales climbed 18% year-over-year, reaching $29.5 billion.
On January 28, Merck & Co., Inc. (NYSE:MRK) declared a quarterly dividend of $0.81 per share, which was in line with its previous dividend. Overall, the company has been growing its payouts for 14 consecutive years, which makes it one of the best dividend stocks on our list. The stock has a dividend yield of 3.62%, as of February 26.
8. Pfizer Inc. (NYSE:PFE)
Number of Hedge Fund Holders: 92
Forward P/E Ratio as of February 26: 9.07
Pfizer Inc. (NYSE:PFE) ranks eighth on our list of the best dividend stocks. The pharmaceutical company mainly manufactures, markets, and sells related products worldwide. The company is prioritizing its oncology pipeline as a key driver of future growth, with plans to introduce several blockbuster drugs by 2030. To strengthen its portfolio, the company is expected to continue seeking acquisitions of promising pharmaceutical firms. A significant portion of its pandemic-related earnings was used to acquire Seagen, a biotech company specializing in oncology, for $43 billion.
Additionally, Pfizer Inc. (NYSE:PFE) reported a 12% operational revenue increase from its non-COVID products over the past year, highlighting its strategic focus on execution. The company successfully reached its $4 billion net cost savings target through an ongoing cost realignment program and has now raised its goal to approximately $4.5 billion by the end of 2025. Under its Manufacturing Optimization Program, Pfizer aims to achieve $1.5 billion in net cost savings by 2027, with initial savings expected in the latter half of 2025. The company remains confident in its ability to restore pre-pandemic operating margins in the years ahead.
Pfizer Inc. (NYSE:PFE) currently offers a quarterly dividend of $0.43 per share, following a 2.4% increase in December 2024, marking its 15th consecutive year of dividend growth. With a dividend yield of 6.51%, as of February 26, PFE is a good investment option for income investors.
7. Union Pacific Corporation (NYSE:UNP)
Number of Hedge Fund Holders: 93
Forward P/E Ratio as of February 26: 20.53
An American railroad holding company, Union Pacific Corporation (NYSE:UNP) transports a wide range of products and commodities, providing it with broad exposure across multiple industries. This diversification helps cushion the impact of slowdowns in any one market segment. The company has enhanced its key operational systems, such as Positive Train Control (PTC), Computer-Aided Dispatch (CADx), and Transportation Management (NetControl), to strengthen safety measures. In addition, it has implemented Precision Gate Technology (PGT), which streamlines entry and exit at ramps and provides a seamless rolling-gate experience for drivers, cutting down the time required for container drop-offs and pickups.
In the fourth quarter of 2024, Union Pacific Corporation (NYSE:UNP) posted revenue of $6.12 billion, reflecting a 1% decline from the prior year. However, a 5% increase in revenue carloads helped offset some of the weakness. The company’s operating ratio improved to 58.7%, marking a 220-basis-point enhancement, despite a 70-basis-point impact from the ratification of a crew staffing agreement. Moreover, operating income rose 5% to $2.5 billion.
On February 6, Union Pacific Corporation (NYSE:UNP) announced a quarterly dividend of $1.34 per share, maintaining its previous payout. The stock supports a dividend yield of 2.18%, as of February 26. The company remained financially strong in FY24, generating over $9.3 billion in operating cash flow and ending the quarter with more than $1 billion in cash and cash equivalents. This stability has enabled Union Pacific to pay dividends consistently for 125 years and raise its payouts annually for the past 18 years, which makes it one of the best dividend stocks on our list.
6. Thermo Fisher Scientific Inc. (NYSE:TMO)
Number of Hedge Fund Holders: 100
Forward P/E Ratio as of February 26: 23.15
Thermo Fisher Scientific Inc. (NYSE:TMO) is an American multinational biotech and life sciences company. It exceeded Wall Street expectations for the fourth quarter, reporting earnings of $6.10 per share and revenue of $11.40 billion, surpassing analyst estimates of $5.94 per share and $11.28 billion in revenue. Although biotech sector spending has remained subdued, potential interest rate cuts could provide a boost by increasing available funding.
Looking ahead, Thermo Fisher Scientific Inc. (NYSE:TMO) anticipates adjusted earnings for 2025 to range between $23.10 and $23.50 per share, aligning with market forecasts. The company is widely recognized as a top-tier player in the healthcare and pharmaceutical industries, offering investors exposure to industry growth without the risks associated with patent expirations or the need for breakthrough drug discoveries. Its revenue stream is highly diversified, with over 80% generated from recurring sources, ensuring stability and reducing investment risk.
Thermo Fisher Scientific Inc. (NYSE:TMO)’s cash flow remained stable in the most recent quarter. The company reported an operating cash flow of $3.3 billion and its free cash flow came in at $2.8 billion. In FY24, it returned $4.6 billion to shareholders through dividends and share repurchases. On February 19, the company declared a 10% hike in its quarterly dividend to $0.43 per share. This marked the company’s eighth consecutive year of dividend growth, which makes it one of the best dividend stocks on our list. As of February 26, the stock has a dividend yield of 0.32%.
5. Citigroup Inc. (NYSE:C)
Number of Hedge Fund Holders: 101
Forward P/E Ratio as of February 26: 10.35
Citigroup Inc. (NYSE:C) is an American multinational investment banking company that offers related services and products to its consumers. In fiscal year 2024, saw its net income rise by nearly 40% to $12.7 billion, surpassing its annual revenue target. This growth was fueled by strong performance in its Services, Wealth, and US Personal Banking divisions. The company kept expenses under control, enhanced its efficiency ratio, and successfully completed a significant restructuring. Annual revenue reached $81.1 billion, marking a 3% year-over-year increase.
Recently, Citigroup Inc. (NYSE:C) has focused on digital transformation and operational efficiency, reinforcing its commitment to adapting to an evolving financial landscape. Its long-term success depends on addressing economic headwinds, maintaining regulatory compliance, managing risks effectively, and investing in technology to improve customer experiences and operational efficiency.
Citigroup Inc. (NYSE:C) pays a quarterly dividend of $0.56 per share, yielding 2.83%, as of February 26. In 2024, the company returned $6.7 billion to shareholders through dividends and share repurchases, emphasizing its dedication to shareholder value. With a 34-year history of consistent dividend payments, it is one of the best dividend stocks on our list.
4. Philip Morris International Inc. (NYSE:PM)
Number of Hedge Fund Holders: 102
Forward P/E Ratio as of February 26: 22.22
Philip Morris International Inc. (NYSE:PM) is a New York-based multinational tobacco company that also offers a wide range of related products. The company remained popular among hedge funds in the fourth quarter of 2024 as 102 funds tracked by Insider Monkey held stakes in the company, up from 75 in the previous quarter. The collective value of these stakes is over $12.6 billion.
Philip Morris International Inc. (NYSE:PM) delivered strong fourth-quarter results for 2024, reporting $9.7 billion in revenue—a 7.3% increase from the same period the previous year. Operating income rose 14.8% year-over-year to $3.3 billion. The company’s smoke-free segment performed exceptionally well, with shipments of heated tobacco units (HTU) and oral nicotine products exceeding 40 billion units for the first time in a single quarter.
Zyn, a nicotine pouch brand that uses nicotine powder and flavoring instead of tobacco, has been a key growth driver since its acquisition in late 2022. In Q4, sales volume for Zyn surged 46.2% to 183.8 million cans. Looking ahead, the company expects Zyn shipments to grow between 34% and 41% in 2025, reaching between 780 million and 820 million cans.
Philip Morris International Inc. (NYSE:PM) has also attracted investor interest with its strong dividend policy. As of February 25, the company pays a quarterly dividend of $1.35 per share, offering a 3.4% dividend yield. With 15 consecutive years of dividend growth, it remains one of the top dividend stocks on the market.
3. Oracle Corporation (NYSE:ORCL)
Number of Hedge Fund Holders: 104
Forward P/E Ratio as of February 26: 24.04
Oracle Corporation (NYSE:ORCL) is an American software company, based in Texas. The company is well known for its cutting-edge data center infrastructure, which is essential for AI development. Demand for its services currently exceeds supply, as it continues to be a key partner for major AI firms such as OpenAI, Cohere, and Elon Musk’s xAI. While the company operates efficiently, it is still striving to keep pace with rising demand. As of fiscal Q1 2025, Oracle had 162 data centers either operational or under construction. To address this shortage, the company has ambitious expansion plans, aiming to grow its data center network to between 1,000 and 2,000 in the future. In the past 12 months, the stock has surged by over 55%.
Oracle Corporation (NYSE:ORCL) posted solid financial results for fiscal Q2 2025, with revenue reaching $14.06 billion, marking a 9% year-over-year increase. Its cloud services segment, which includes Infrastructure-as-a-Service (IaaS) and Software-as-a-Service (SaaS), brought in $5.9 billion, reflecting a 24% increase in both USD and constant currency. Cloud infrastructure revenue (IaaS) saw particularly strong growth, surging 52% to $2.4 billion. At this pace, Oracle’s cloud revenue is projected to surpass $25 billion for the fiscal year.
Oracle Corporation (NYSE:ORCL) has also gained investor interest due to its consistent dividend payments. It currently offers a quarterly dividend of $0.40 per share and has a dividend yield of 0.93%, as of February 26. The company has been distributing dividends since 2009 and has increased payouts at an average annual rate of nearly 11% over the past five years, which makes it one of the best dividend stocks on our list.
2. Bank of America Corporation (NYSE:BAC)
Number of Hedge Fund Holders: 113
Forward P/E Ratio as of February 26: 11.88
Bank of America Corporation (NYSE:BAC) is an American financial services company that offers a wide range of related services and products to its consumers. In the fourth quarter of 2024, the company delivered strong financial results, with revenue climbing to $25.3 billion from $22 billion in the same quarter the previous year. Net income more than doubled, reaching $6.7 billion compared to $3.1 billion a year earlier. The bank also continued expanding its customer base, adding 213,000 new consumer checking accounts—extending its streak of quarterly growth to six years. Additionally, it distributed $2 billion to shareholders through dividend payments.
Bank of America Corporation (NYSE:BAC) remains one of the best dividend stocks, having maintained regular dividend payments for 27 consecutive years. The company currently offers a quarterly dividend of $0.26 per share, yielding 2.37% as of February 26.
With a strong presence in retail banking, Bank of America Corporation (NYSE:BAC) serves millions of customers through checking accounts, credit cards, mortgages, and lending services. Its well-established digital banking platform enhances accessibility, while its investment banking and asset management divisions—including Merrill and BofA Securities—provide advisory, trading, and financial planning services.
1. JPMorgan Chase & Co. (NYSE:JPM)
Number of Hedge Fund Holders: 123
Forward P/E Ratio as of February 26: 14.01
An American multinational financial services company, JPMorgan Chase & Co. (NYSE:JPM) offers services in commercial banking, financial transaction processing, and asset management. In FY24, the company posted record earnings, with annual profits rising 18% year-over-year to $58.5 billion. This growth was largely fueled by its investment banking and trading divisions, which capitalized on a market recovery in the fourth quarter. However, net interest income (NII) declined 3% year-over-year in Q4 2024 to $23.5 billion, marking its first drop since 2021.
JPMorgan Chase & Co. (NYSE:JPM) has maintained a strong reputation as a top dividend stock, consistently paying dividends since 1972. In the most recent quarter, it reinforced its commitment to shareholder returns by distributing $3.5 billion in dividends. The company currently offers a quarterly dividend of $1.25 per share, with a yield of 1.93% as of February 26.
JPMorgan Chase & Co. (NYSE:JPM) has accumulated significant excess capital, equivalent to roughly 10% of its market capitalization while maintaining a disciplined approach to capital allocation. Although share buybacks are a lower priority, it repurchased $6.36 billion worth of stock in Q3 2024. As economic conditions improve, the company is expected to ease its cash reserves and return more capital to shareholders over time.
Overall, JPMorgan Chase & Co. (NYSE:JPM) ranks first on our list of the best affordable dividend stocks. 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.
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