In this article, we discuss some of the best stocks for steady dividends.
Generating income has consistently been a primary goal for investors. To achieve this, they often opt for investments that provide steady and reliable returns over time. Dividend stocks are particularly popular in this regard, as they are well-regarded for offering regular income. Although using cash payouts from a stock portfolio is a popular approach among individuals nearing retirement, building an equity income portfolio is an option available to anyone. Over the years, dividends have significantly enhanced investors’ overall returns, making these stocks a compelling choice for income-focused portfolios. In certain periods, especially when equity returns fell below 10%, dividends have accounted for more than half of the total returns of major market indices, according to LSEG data.
Investors are increasingly emphasizing the quality of a company’s earnings. Examining factors such as dividends per share, dividend growth, and the stability of dividend payments can provide valuable insights into a company’s financial stability. Those who prioritize businesses with lower debt levels and higher profitability often target well-established, financially robust firms with greater flexibility. These high-quality companies typically demonstrate stronger resilience during market downturns and are more likely to sustain earnings growth across different market conditions.
Also read: 8 Best Dividend Leaders to Buy According to Wall Street Analysts
According to a report by BlackRock, historically, stocks that consistently grew or maintained their dividends have delivered better performance compared to those that either did not pay dividends or reduced their payouts. During market downturns, dividend-paying stocks often provide a buffer against the volatility of share prices. Companies that issue dividends typically strive to maintain these payments and are generally reluctant to reduce them unless absolutely unavoidable.
When investing in dividend stocks, investors often evaluate the dividend yield. Experts recommend focusing on yields within the 3% to 6% range, as higher yields may indicate potential yield traps. Brian Bollinger, president of Simply Safe Dividends, has also emphasized this point. Here are some comments from the analyst:
“I generally like to advocate for an approach of targeting great businesses that might pay closer to a 3% to 4% dividend yield.”
He further mentioned that these companies tend to gradually increase their payouts, which can enhance annual income streams and help counter the impact of inflation. Regarding companies with lower yields, he noted that they are often associated with more secure businesses and more reliable dividend payments. For example, the Dividend Aristocrat Index, which monitors companies with at least 25 years of consistent dividend growth, has an indicated yield of 2.28%. According to Bollinger, many of the firms in this index are well-established and financially stable. He suggested that creating a diversified portfolio of these companies can provide reassurance, as it builds a solid foundation for a growing stream of passive income, regardless of market fluctuations. He further said:
“When stock prices fall, it’s so easy to panic, but dividend investing can overcome that because you’re just trying to stay focused on your income stream. You don’t care so much about the markets’ short-term ups and downs anymore.”
As a result, investors often include dividend stocks in their portfolios. In this article, we will take a look at some of the best dividend stocks with steady income.
Photo by Dan Dennis on Unsplash
Our Methodology:
For this list, we first filtered dividend stocks that have shown at least 10 consecutive years of dividend growth. From this group, we selected those with dividend yields above 1.5% as of December 20. Lastly, we chose 10 companies that have achieved a share price return of over 30% over the past five years. The stocks are ranked in ascending order of their dividend yields as of December 20. 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).
10. Tractor Supply Company (NASDAQ:TSCO)
Dividend Yield as of December 20: 1.67%
5-Year Share Price Return: 189.6%
Tractor Supply Company (NASDAQ:TSCO) is an American farm supplies company that sells home improvement and related equipment and supplies. The company sells a significant amount of animal feed and large farming equipment, products that are unlikely to be overtaken by e-commerce due to their size and weight. With almost 2,300 locations, the company is the leading chain in its market. Although other major retailers might carry similar items, Tractor Supply’s stores are primarily located in rural areas where these products are in high demand. In contrast, larger retailers typically focus on opening stores in more densely populated regions. In the past five years, the stock has surged by nearly 190%.
In the third quarter of 2024, Tractor Supply Company (NASDAQ:TSCO) reported revenue of $3.47 billion, up 1.6% from the same period last year. This growth was driven by new store openings. The company’s business fundamentals remained solid, with continuous gains in market share. Nearly half of its stores have adopted the Project Fusion layout, and with over 550 garden centers, the company continues to invest in its stores, supply chain, and capabilities to enhance customer loyalty and set a higher standard for the industry.
In addition, Tractor Supply Company (NASDAQ:TSCO) reported a strong cash position. In the first nine months of 2024, the company generated an operating cash flow of over $903.6 million. It ended the quarter with over $186 million available in cash and cash equivalents. Moreover, it returned approximately $118 million to shareholders through dividends in Q3, which shows that TSCO is one of the best stocks for steady dividends.
On November 7, Tractor Supply Company (NASDAQ:TSCO) declared a quarterly dividend of $1.10 per share, which was in line with its previous dividend. The company holds a 15-year streak of consistent dividend growth. The stock has a dividend yield of 1.67%, as of December 20.
At the end of Q3 2024, 29 hedge funds tracked by Insider Monkey held stakes in Tractor Supply Company (NASDAQ:TSCO), compared with 35 in the previous quarter. These stakes have a consolidated value of over $786 million. With over 7.5 million shares, Select Equity Group was the company’s leading stakeholder in Q3.
9. Colgate-Palmolive Company (NYSE:CL)
Dividend Yield as of December 20: 2.17%
5-Year Share Price Return: 33.8%
Colgate-Palmolive Company (NYSE:CL) is a New York-based manufacturing company that mainly specializes in a wide range of consumer products. The company is a well-known brand in the consumer goods sector, offering products in Oral Care, Personal Care, Home Care, and Pet Nutrition. Recently, it has placed significant emphasis on sustainability and expanding its product range. Its goal to make all packaging recyclable by 2025 reflects the growing environmental awareness among consumers and regulators. Through initiatives like renewable energy partnerships, Colgate is aligning its operations with future market demands and regulatory requirements. In the past five years, the stock has surged by nearly 34%.
In the third quarter of 2024, Colgate-Palmolive Company (NYSE:CL) posted revenue of $5.03 billion, which showed a 2.4% growth from the same period last year. The revenue also beat analysts’ estimates by $27.2 million. The company has maintained its leadership in the toothpaste market, holding a global market share of 41.6% year to date. It has also remained a leader in the manual toothbrush segment, with a global market share of 32.3% for the same period.
In addition, Colgate-Palmolive Company (NYSE:CL) has achieved its sixth consecutive quarter of gross margin expansion, alongside growth in operating profit, net income, and earnings per share. Advertising spending rose by 16% during the quarter, driven by science-led innovations in both core and premium products across various price ranges. The company’s strong performance this quarter and year to date has bolstered its confidence that the right strategies are being executed to meet the updated 2024 expectations for organic sales growth and Base Business earnings. These efforts are also aimed at driving cash flow and generating consistent, compounded earnings per share growth.
In the first nine months of the year, Colgate-Palmolive Company (NYSE:CL) reported an operating cash flow of nearly $3 billion. The company declared a quarterly dividend of $0.50 per share on December 11, which remained unchanged from the previous dividend. Overall, it has raised its payouts for 62 consecutive years, which makes CL one of the best stocks with steady dividends. The stock’s dividend yield on December 20 came in at 2.17%.
As of the close of Q3 2024, 54 hedge funds tracked by Insider Monkey reported having stakes in Colgate-Palmolive Company (NYSE:CL), up from 52 in the previous quarter. These stakes have a collective value of over $3.4 billion. Among these hedge funds, GQG Partners was the company’s leading stakeholder in Q3.
8. QUALCOMM Incorporated (NASDAQ:QCOM)
Dividend Yield as of December 20: 2.24%
5-Year Share Price Return: 70.9%
QUALCOMM Incorporated (NASDAQ:QCOM) is a California-best semiconductor company that also offers services in wireless technology. The company has established a solid presence in the smartphone chip industry and stands to gain from the rapidly expanding generative AI smartphone market. IDC projects this segment to grow at an annual rate of 78% through 2028, with yearly shipments anticipated to reach 912 million units by the end of the forecast period. In addition, the company ranks as the second-largest player in the smartphone application processor market, holding a 31% market share, according to Counterpoint Research. The stock has surged by nearly 71% in the past five years.
In fiscal Q4 2024, QUALCOMM Incorporated (NASDAQ:QCOM) delivered robust earnings, reporting revenues of $10.24 billion, an 18% increase compared to the same quarter last year. Net income saw a year-over-year rise of 33%, reaching $3.5 billion. Moreover, the company achieved annual earnings per share growth of over 30% for fiscal 2024.
Madison Investments highlighted QCOM in its Q3 2024 investor letter. Here is what the firm has to say:
“Alphabet Inc., Eli Lilly and Company, QUALCOMM Incorporated (NASDAQ:QCOM), Microsoft Corporation, and Apple Inc. were the largest detractors. Qualcomm has given back some of its first half gains after the CFO commented at a conference that its entrance into the AI PC business would take time to ramp. We continue to see Qualcomm as well positioned with growth from AI moving into the mobile phone, from new opportunities in the Internet of Things (IoT), and within the Auto industry but will also look to future growth as they enter the PC market.”
QUALCOMM Incorporated (NASDAQ:QCOM) maintains a strong cash position to sustain its dividend payments. By the end of the quarter, the company held $8 billion in cash and cash equivalents. Its operating cash flow increased to $12.2 billion, up from $11.3 billion in the same period last year. During the quarter, QUALCOMM returned $2.2 billion to shareholders through dividends and share buybacks. It is one of the best stocks for steady income as the company has raised its payouts for 20 consecutive years. The company offers a quarterly dividend of $0.85 per share and has a dividend yield of 2.24%, as recorded on December 20.
QUALCOMM Incorporated (NASDAQ:QCOM) was included in 74 hedge fund portfolios at the end of Q3 2024, as per Insider Monkey’s database. The stakes held by these funds have a consolidated value of more than $3.23 billion. With over 2 million shares, Two Sigma Advisors was the company’s leading stakeholder in Q3.
