In this article, we discuss the 10 best stocks to buy for income. If you want to read about some more dividend stocks, go directly to the 5 Best Stocks To Buy For Income.
After logging its worst annual performance in 14 years back in 2022, the S&P 500 kicked off 2023 with a very strong January. The benchmarked index gained a little over 6% for the month as the first wave of fourth-quarter earnings reports came in better than many had feared. This performance bodes well for the remainder of 2023, at least from a historical perspective. However, Richard Saperstein, chief investment officer at Treasury Partners, says that the stock market and the economy aren’t in the clear just yet. According to Saperstein:
“Markets have been reacting favorably to moderating inflation and expectations of a reduced pace of Fed tightening, but the lag effects of the Fed’s tightening so far will slow the economy in the second half of 2023 and cause analysts to slash earnings estimates, which ultimately is a headwind for stocks.”
With persisting inflationary pressures and a possibility of a recession, investors are looking towards options to generate stable income. Dividend stocks have previously dealt favorably with uncertain market conditions and boosted investors’ confidence amid fluctuations. According to a report by iShares, dividend stocks reported a 12.5% decline in bear markets from 1978 to 2021, compared with a 30.7% drop in non-dividend stocks. Dividend-paying stocks tend to weather down equity markets better than non-payers. This seems intuitive, as the ability to consistently pay dividends suggests that a company is mature, has cash flow and cash on hand, all of which point towards the company in question being relatively stable.
Companies that have historically raised their dividends consistently are known to demonstrate better income-generating abilities and market resilience compared to their peers. In that regard, Philip Morris International Inc. (NYSE:PM), Verizon Communications Inc. (NYSE:VZ), and AT&T Inc. (NYSE:T) are among the many names on this list that boast decades of dividend growth streaks and are outperforming the broader index this year so far.
Photo by Annie Spratt on Unsplash
Our Methodology:
We scanned Insider Monkey’s database of 920 hedge funds’ holdings and picked the top 10 dividend-paying stocks with yields over 4.5% as of February 14. That means these are some of the best dividend stocks to buy for income according to hedge funds. The dividend stocks mentioned below are reliable options for stable income as they have strong dividend histories in addition to healthy balance sheets and sound financials.
Best Stocks To Buy For Income
10. Realty Income Corporation (NYSE:O)
Number of Hedge Fund Holders: 28
Dividend Yield as of February 14: 4.54%
Organized in Maryland and headquartered in San Diego, Realty Income Corporation (NYSE:O), also known as The Monthly Dividend Company, is a real estate investment trust that invests in free-standing, single-tenant commercial properties in the United States, Spain and the United Kingdom that are subject to NNN Leases.
Earlier this December, Mizuho analyst Haendel St. Juste raised the price target on Realty Income Corporation (NYSE:O) to $64 from $61 and kept a Neutral rating on the shares. According to the analyst, the macro challenges may persist for the triple net real estate investment trusts, along with growing recession risk. In light of that however, he remains favorable towards triple net REITs with “defensive tenancy, low leverage, and pre-funded capital.”
Boasting a dividend growth track record of 28 years, Realty Income Corporation (NYSE:O) offers a monthly dividend of $0.2485 per share and has a dividend yield of 4.54%, as of February 14.
The number of hedge funds tracked by Insider Monkey owning stakes in Realty Income Corporation (NYSE:O) grew to 28 in Q3 2022, from 19 in the previous quarter. These stakes are valued at $422.5 million collectively. Zimmer Partners was the company’s largest stakeholder in Q3, holding roughly 3 million shares valued at $168.9 million.
Realty Income Corporation (NYSE:O) joins the ranks of Philip Morris International Inc. (NYSE:PM), Verizon Communications Inc. (NYSE:VZ), and AT&T Inc. (NYSE:T) as a decent income stock.
9. Hasbro, Inc. (NASDAQ:HAS)
Number of Hedge Fund Holders: 33
Dividend Yield as of February 14: 4.82%
Hasbro, Inc. (NASDAQ:HAS) is an American multinational conglomerate holding company. Its products include toys, puzzles, board games, sports equipment, and electronic games. The company owns the trademarks and products of Kenner, Milton Bradley, Parker Brothers, and Wizards of the Coast, among others. As of February 14, Hasbro, Inc. (NASDAQ:HAS) holds a dividend yield of 4.82%.
On January 27, BMO Capital analyst Gerrick Johnson reiterated a Market Perform rating and $66 price target on Hasbro, Inc. (NASDAQ:HAS) after the company announced preliminary Q4 results below Wall Street estimates. The analyst was not surprised by this announcement as he was expecting worse results. However, Johnson did state that what did end up catching him off guard was the announcement that write-downs were mostly reorganization-related and not operational, with no mention of writing off inventory or minimum royalty guarantees.
According to Insider Monkey’s data, 33 hedge funds were bullish on Hasbro, Inc. (NASDAQ:HAS) at the end of Q3 2022, compared to 30 funds in the prior quarter. Connor Haley’s Alta Fox Capital Management is the leading position holder in the company, with 3.14 million shares worth over $257 million.
8. Kinder Morgan, Inc. (NYSE:KMI)
Number of Hedge Fund Holders: 38
Dividend Yield as of February 14: 6.06%
Kinder Morgan, Inc. (NYSE:KMI) specializes in owning and controlling oil and gas pipelines and terminals. One of the largest infrastructure companies in North America, Kinder Morgan owns an interest in or operates approximately 83,000 mi of pipelines and 143 terminals.
Earlier this December, Citi analyst Spiro Dounis initiated coverage of Kinder Morgan, Inc. (NYSE:KMI) with a Neutral rating and $19 price target. The analyst launched coverage of 23 midstream stocks with a “constructive cash flow outlook” but acknowledged the “need to be selective in this environment.” Dounis states that with leverage and capital spending “down substantially,” the midstream sector has “arguably never been better prepared for macro headwinds.”
On January 18, Kinder Morgan, Inc. (NYSE:KMI) declared a quarterly dividend of $0.2775 per share, which fell in line with its previous dividend. With a dividend yield of 6.06%, as of February 14, the company is one of the best dividend stocks on our list as it has been raising its dividends consistently for the past five years.
As of the end of Q3 2022, 38 hedge funds tracked by Insider Monkey owned stakes in Kinder Morgan, Inc. (NYSE:KMI), compared with 41 in the previous quarter. These stakes have a collective value of over $1.06 billion. Orbis Investment Management was the company’s leading stakeholder in Q3.
7. Dow Inc. (NYSE:DOW)
Number of Hedge Fund Holders: 43
Dividend Yield as of February 14: 4.72%
The Dow Chemical Company, officially Dow Inc. (NYSE:DOW), is an American multinational corporation that operates as a producer and supplier of raw materials for products in a wide variety of industries, including appliance, automotive, agricultural, chemical processing, electronics, oil and gas, and processed foods. The chemical producer had a dividend yield of 4.72% as of February 14.
On February 6, Credit Suisse analyst Matthew Skowronski double upgraded Dow Inc. (NYSE:DOW) to Outperform from Underperform with a $68 price target after assuming coverage of the name. The analyst expects 2023 to be a “trough year” for earnings, as the pricing and margin headwind from new capacity in several derivatives dissipates.
At the end of September, 43 hedge funds tracked by Insider Monkey had investments in Dow Inc. (NYSE:DOW), valued at nearly $710 million. With over 7.5 million shares, Pzena Investment Management was the company’s leading stakeholder in Q3.
6. Altria Group, Inc. (NYSE:MO)
Number of Hedge Fund Holders: 47
Dividend Yield as of February 14: 7.93%
Altria Group, Inc. (NYSE:MO) is an American corporation and one of the world’s largest producers and marketers of tobacco, cigarettes and related products. With a leading portfolio of tobacco products for U.S. tobacco consumers, the company ranks as an undisputed market leader in the U.S. tobacco industry. On January 10, Altria Group, Inc. (NYSE:MO) paid a $0.94 per share quarterly dividend.
The Marlboro maker beat earnings and revenue estimates in the fourth quarter and announced a new $1 billion share buyback plan, which is expected to conclude by December 31, 2023. On February 1, the company also announced that it plans to pay off approximately $1.3 billion in outstanding notes using its readily available cash.
According to Insider Monkey’s data, 47 hedge funds were long Altria Group, Inc. (NYSE:MO) at the end of the third quarter of 2022, compared to 48 funds in the last quarter. Peter Rathjens, Bruce Clarke, and John Campbell’s Arrowstreet Capital held the largest stake in the company, with 9.5 million shares worth $382.6 million.
Much like Philip Morris International Inc. (NYSE:PM), Verizon Communications Inc. (NYSE:VZ), and AT&T Inc. (NYSE:T), Altria Group, Inc. (NYSE:MO) can garner investors hefty rewards.
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Disclosure: None. 10 Best Stocks To Buy For Income is originally published on Insider Monkey.
