In this article, we will be looking at the 10 best dividend champions to buy now. If you want to skip our detailed analysis of dividend investing, you can go directly to the 5 Best Dividend Champions to Buy Now.
What is a Dividend Champion?
The term ‘dividend champion’ is used to refer to those dividend stocks that have consistently increased their dividend yields for 25 years or more. The dividend champions need not be part of the S&P 500 Index, unlike the dividend aristocrats. Yet, they are some of the safest dividend stock picks for any investor, in light of the fact that they consistently grow their dividends for at least 25 years.
For as long as dividend investing has stuck around as an income investor’s go-to investment strategy, the number of categories setting apart the good dividends stocks from the bad ones are certainly more than most can handle. However, the existence of reliable dividend stocks identified by their consecutive yield increases and ability to continue paying out their dividends without a hassle can be a saving grace for the beginner dividend investor who may otherwise become prey to riskier stocks and financial losses.
The coronavirus pandemic had quite the impact on dividend stocks, with many investors practically avoiding these stocks like the plague. In 2020 for instance, to begin with, many dividend-yielders cut their yields to the dismay of shareholders. According to T. Rowe Price, about 30% of the MSCI World Index’s stocks announced dividend cuts last year, hitting a record high of dividend reductions. Dividend stocks also underperformed throughout 2020 because of the pandemic, as seen by a comparison between the returns of dividend payers and non-dividend payers in the S&P 500. S&P 500 dividend stock returns in 2020 were just under 15%, for instance, while non-dividend-paying stock returns were almost 40%.
While this underperformance in the past year is undeniable and regrettable, it should not become a justification for an outright boycott of dividend stocks and investing. Come 2021, dividend payers began regaining some lost ground, as the S&P 500 dividend payer’s in the first quarter of 2021 outperformed the non-dividend payers with their returns of almost 10% as compared to the latter’s returns of under 5%. T. Rowe Price has estimated that global dividend investing strategies are set to recover this year and in the future, in light of economic recovery and growth across the globe and growing investor confidence seeping back into dividend investing.
The International Monetary Fund has, for instance, estimated in its April World Economic Outlook that the global economy will grow by 6% in 2021, while the New York Times has estimated that over 3.42 billion vaccine doses have been administered across the globe, indicating that times of financial and social volatility introduced by the pandemic may soon also be coming to an end. As such, dividend stocks like Walmart Inc. (NYSE: WMT), Medtronic plc (NYSE: MDT), McDonald’s Corporation (NYSE: MCD), and Exxon Mobil Corporation (NYSE: XOM) are set to benefit in the coming years.
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Investing is becoming difficult by the day, even for the smart money. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Without further ado, let’s look at the 10 best dividend champions to buy now. The stocks added to our list below were selected on the basis of hedge fund sentiment, analysts’ ratings, fundamentals, and growth potential based on core business strengths. We also took into account their consecutive years of dividend growth, as a metric to determine dividend safety and stability.
Best Dividend Champions to Buy Now
10. Caterpillar Inc. (NYSE: CAT)
Number of Hedge Fund Holders: 53
Dividend Yield: 2.04%
Consecutive Years of Dividend Growth: 28
Caterpillar Inc. (NYSE: CAT) is a manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives across the world. The company ranks 10th on our list of the best dividend champions to buy now.
This June, Deutsche Bank raised its price target on Caterpillar Inc. (NYSE: CAT) from $259 to $273 with a Buy rating on the shares. Analyst Nicole Deblase commented that machinery stocks fare well in the first couple of years of economic recovery because of outsized positive earnings revisions, indicating that Caterpillar Inc. (NYSE: CAT) may do the same. Additionally, President Biden’s $1.2 trillion bipartisan infrastructure spending plan is set to benefit a wide variety of stocks, with Caterpillar Inc. (NYSE: CAT) having been named as one of the beneficiaries.
In the first quarter of 2021, Caterpillar Inc. (NYSE: CAT) had an EPS of $2.87, beating estimates by $0.93. The company’s revenue was $11.89 billion, up 11.77% year over year and beating estimates by $799.74 million. The company has a gross profit margin of 25.15% and the stock has gained 10.06% in the past 6 months and 19.36% year to date.
By the end of the first quarter of 2021, 53 hedge funds out of the 866 tracked by Insider Monkey held stakes in Caterpillar Inc. (NYSE: CAT). The total value of their stakes was roughly $4.95 billion. This is compared to 53 hedge funds in the previous quarter with a total stake value of approximately $4.15 billion.
Like Walmart Inc. (NYSE: WMT), Medtronic plc (NYSE: MDT), McDonald’s Corporation (NYSE: MCD), and Exxon Mobil Corporation (NYSE: XOM), Caterpillar Inc. (NYSE: CAT) is a reliable dividend champion to invest in.
9. Raytheon Technologies Corporation (NYSE: RTX)
Number of Hedge Fund Holders: 58
Dividend Yield: 2.36%
Consecutive Years of Dividend Growth: 28
Raytheon Technologies Corporation (NYSE: RTX) is an aerospace and defense company serving commercial, military, and government customers across the globe. The company ranks 9th on our list of the best dividend champions to buy now.
This June, Raytheon Technologies Corporation (NYSE: RTX) saw its price target raised from $95 to $105 at Jefferies. The firm also has a Buy rating on the stock. Raytheon Technologies Corporation’s (NYSE: RTX) business has also been booming, as the company has managed to consistently bring in work contracts, like the $171.6 million contract for Low-Rate Initial Production Lot I of the Next Generation Jammer Mid-Band this July, and another $2 billion Air Force contract in the same month, among a wide range of others.
In the first quarter of 2o21, Raytheon Technologies Corporation (NYSE: RTX) had an EPS of $0.90, beating estimates by $0.07. The company’s revenue was $15.25 billion, missing estimates by $81.84 million, and it has a gross profit margin of 14.82%. The stock has gained 20.78% in the past 6 months and 26.23% year to date.
By the end of the first quarter of 2021, 58 hedge funds out of the 866 tracked by Insider Monkey held stakes in Raytheon Technologies Corporation (NYSE: RTX). The total value of their stakes was roughly $2.49 billion. This is compared to 59 hedge funds in the previous quarter with a total stake value of approximately $2.72 billion.
Like Walmart Inc. (NYSE: WMT), Medtronic plc (NYSE: MDT), McDonald’s Corporation (NYSE: MCD), and Exxon Mobil Corporation (NYSE: XOM), Raytheon Technologies Corporation (NYSE: RTX) is a reliable dividend champion to invest in.
Davis Funds, an investment management firm, mentioned Raytheon Technologies Corporation (NYSE: RTX) in its fourth-quarter 2020 investor letter. Here’s what they said:
“In today’s uncertain economy, we believe we have found such businesses trading at bargain prices in two sectors: industrials and financials. In the industrial space, concerns about the impact of the economic downturn on short-term profitability led to a wave of selling in a select group of leaders with durable competitive advantages, long records of profitability and bright long-term prospects. Companies like Raytheon Technologies is a wonderful example of attractive investments in this sector.”
8. Walmart Inc. (NYSE: WMT)
Number of Hedge Fund Holders: 58
Dividend Yield: 1.57%
Consecutive Years of Dividend Growth: 48
Walmart Inc. (NYSE: WMT) is a retail company engaging in wholesale and retail alongside other business units globally. The company operates supercenters, supermarkets, warehouse clubs, and other sorts of stores for its customers, and it ranks 8th on our list of the best dividend champions to buy now.
Citigroup reiterated its Buy rating on Walmart Inc. (NYSE: WMT) with a $179 price target this June. Analyst Paul Lejuez has made positive comments about the stock, saying that it is emerging strongly from the pandemic and that it has a cheap and attractive valuation multiple. Walmart Inc. (NYSE: WMT) has also entered into a strategic agreement with Ibotta to provide its customers with hundreds of cash rebates on demanded products.
In the fiscal first quarter of 2022, Walmart Inc. (NYSE: WMT) had an EPS of $1.69, beating estimates by $0.48. The company’s revenue was $137.16 billion, up 2.61% year over year and beating estimates by $5.04 billion as well. Walmart Inc. (NYSE: WMT) has a gross profit margin of 25.10% and it has gained 8.32% in the past year.
By the end of the first quarter of 2021, 58 hedge funds out of the 866 tracked by Insider Monkey held stakes in Walmart Inc. (NYSE: WMT). The total value of their stakes was roughly $5.88 billion. This is compared to 70 hedge funds in the previous quarter with a total stake value of approximately $6.19 billion.
7. NextEra Energy, Inc. (NYSE: NEE)
Number of Hedge Fund Holders: 63
Dividend Yield: 2.05%
Consecutive Years of Dividend Growth: 27
NextEra Energy, Inc. (NYSE: NEE) is an energy company working to generate, transmit, distribute, and sell electricity to retail and wholesale customers in the entirety of North America. The company ranks 7th on our list of the best dividend champions to buy now.
As of this May, Barclays had an Equal Weight rating on NextEra Energy, Inc. (NYSE: NEE) shares. Additionally, NextEra Energy, Inc. (NYSE: NEE) offered EPS guidance this April, stating that it expects an EPS growth of 6-8% for 2022 and 2023, making the EPS ranges $2.55-$2.75 and $2.77-$2.97 respectively.
In the first quarter of 2021, NextEra Energy, Inc. (NYSE: NEE) had an EPS of $0.67, beating estimates by $0.06. The company’s revenue was $3.73 billion, missing estimates by $1.16 billion. NextEra Energy, Inc. (NYSE: NEE) has a gross profit margin of 55.97% and it has gained 17.06% in the past year as well.
By the end of the first quarter of 2021, 63 hedge funds out of the 866 tracked by Insider Monkey held stakes in NextEra Energy, Inc. (NYSE: NEE). The total value of their stakes was roughly $2.72 billion. This is compared to 61 hedge funds in the previous quarter with a total stake value of approximately $3.07 billion.
Like Walmart Inc. (NYSE: WMT), Medtronic plc (NYSE: MDT), McDonald’s Corporation (NYSE: MCD), and Exxon Mobil Corporation (NYSE: XOM), NextEra Energy, Inc. (NYSE: NEE) is a reliable dividend champion to invest in.
6. AT&T Inc. (NYSE: T)
Number of Hedge Fund Holders: 63
Dividend Yield: 7.31%
Consecutive Years of Dividend Growth: 36
AT&T Inc. (NYSE: T) is a telecommunications company providing media and technology services across the world. The company operates the AT&T, Cricket, AT&T TV, and AT&T Fiber brands, among others, and ranks 6th on our list of the best dividend champions to buy now.
This July, Tigress Financial reiterated a Buy rating on AT&T Inc. (NYSE: T) with a 12-month price target of $36. Analyst Ivan Feinseth commended the WarnerMedia transaction, stating that the company is now set to benefit from gains in return on capital alongside higher profitability and shareholder value creation.
In the first quarter of 2021, AT&T Inc. (NYSE: T) had an EPS of $0.86, beating estimates by $0.08. The company’s revenue was $43.94 billion, up 2.71% year over year, beating estimates by $1.27 billion. AT&T Inc. (NYSE: T) has a gross profit margin of 52.68% as well.
By the end of the first quarter of 2021, 63 hedge funds out of the 866 tracked by Insider Monkey held stakes in AT&T Inc. (NYSE: T). The total value of their stakes was roughly $2.701 billion. This is compared to 58 hedge funds in the previous quarter with a total stake value of approximately $1.04 billion.
Like Walmart Inc. (NYSE: WMT), Medtronic plc (NYSE: MDT), McDonald’s Corporation (NYSE: MCD), and Exxon Mobil Corporation (NYSE: XOM), AT&T Inc. (NYSE: T) is a reliable dividend champion to invest in.
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Disclosure: None. 10 Best Dividend Champions to Buy Now is originally published on Insider Monkey.
