In this article, we discuss 10 dividend stocks to buy for financial freedom. If you want to see more stocks in this selection, click 5 Dividend Stocks to Buy for Financial Freedom.
According to Goldman Sachs, investors expect higher share repurchases and increasing dividends in 2022. The investment bank raised the buyback estimate to $1 trillion, 12% more than in 2021, which is almost an all-time high. Goldman Sachs also increased its dividend growth projections to 10% from 8%, with energy stocks leading the dividend payments, driven by soaring oil prices and robust cash flows.
On March 29, Vanguard’s 2022 U.S. growth outlook remained unchanged at 3.5%, despite Russia’s invasion of Ukraine, which led to higher uncertainty in the global economy. The Fed has also indicated higher rate hikes ahead. Soaring oil prices have added inflationary pressure to the economy and downside risks to GDP growth.
Dividends are an effective hedge against inflation, and investors gravitate towards passive income opportunities to earn extra money. Entering the stock market to gain financial freedom, investing in dividend paying stocks is a lucrative strategy. Some of the most notable dividend stocks to buy for financial freedom include Johnson & Johnson (NYSE:JNJ), JPMorgan Chase & Co. (NYSE:JPM), and PepsiCo, Inc. (NASDAQ:PEP), among others discussed in detail below.
Our Methodology
We selected dividend stocks that have been consistent with dividend payments over the years, have solid business operations, and robust balance sheets. We have mentioned the analyst ratings for the stocks, which were carefully screened based on optimistic analyst sentiment as well.
Data from 900+ elite hedge funds tracked by Insider Monkey in Q4 2021 was used to identify the number of hedge funds that hold stakes in each company.
Photo by Zach Betten on Unsplash
Dividend Stocks to Buy for Financial Freedom
10. Bank of America Corporation (NYSE:BAC)
Dividend Yield as of May 12: 2.43%
Number of Hedge Fund Holders: 84
Bank of America Corporation (NYSE:BAC) was founded in 1784 and is based in Charlotte, North Carolina. The company offers financial products and services via Consumer Banking, Global Wealth & Investment Management, Global Banking, and Global Markets segments. Bank of America Corporation (NYSE:BAC) offers a dividend yield of 2.43% as of May 12.
On April 18, Bank of America Corporation (NYSE:BAC) reported earnings for Q1 2022, posting an EPS of $0.80, beating analysts’ estimates by $0.06. The revenue of $23.23 billion revenue surpassed market predictions by $135.77 million. On May 5, Bank of America Corporation (NYSE:BAC) announced that credit and debit card spending in April increased 13% compared to the same period last year, with credit card spending climbing 22% and debit card spending by 6%.
Bank of America Corporation (NYSE:BAC) declared on April 27 a $0.21 per share quarterly dividend, in line with previous. The dividend is payable on June 24, to shareholders of record on June 3. The bank also announced a regular quarterly dividend of $1.75 per share on the 7% Series B Cumulative Redeemable Preferred Stock. The dividend is payable on July 25, to shareholders of record on July 8.
Oppenheimer analyst Chris Kotowski on May 3 maintained an Outperform rating on Bank of America Corporation (NYSE:BAC) but lowered the price target on the shares to $50 from $52. According to the analyst, loan growth and soaring interest rates are good for the banking industry even amid a recession. He believes that banks should remain “solidly profitable with their dividends intact” and investors should take advantage of the recent share weakness.
According to Insider Monkey’s Q4 data, Bank of America Corporation (NYSE:BAC) was found in the public stock portfolios of 84 hedge funds, up from 72 funds in the last quarter. Bank of America Corporation (NYSE:BAC) is a notable dividend payer in Warren Buffett’s Berkshire Hathaway portfolio, with the hedge fund holding more than 1 billion shares worth about $45 billion. Berkshire Hathaway is the leading shareholder of the company as of Q4 2021.
Here is what ClearBridge Investments has to say about Bank of America Corporation (NYSE:BAC) in its Q1 2021 investor letter:
“Higher long-term interest rates supported financials such as Bank of America, which has shown both defensive and offensive characteristics in the past year. We believe it continues to be the least risky large bank from a credit standpoint, with conservative underwriting and controlled risk taking, a leading consumer deposit franchise, scale and technology. It is also a leader in its commitments to sustainability, or as it terms it, responsible growth. Disclosure and reporting at all levels form a large part of this commitment, including gender diversity and equality, environmental commitments and support of communities in which it operates. In the first quarter Bank of America announced it is setting a goal of net-zero greenhouse gas (GHG) emissions in its supply chain and operations, and notably also in its financing activities, before 2050.”
9. JPMorgan Chase & Co. (NYSE:JPM)
Dividend Yield as of May 12: 3.45%
Number of Hedge Fund Holders: 107
JPMorgan Chase & Co. (NYSE:JPM) is an American multinational financial services corporation, providing investment management, banking, and lending products and services to consumers and corporations. JPMorgan Chase & Co. (NYSE:JPM)’s Q1 revenue of $30.72 billion outperformed estimates by $318.51 million.
JPMorgan Chase & Co. (NYSE:JPM) has consistently raised dividends for the last 11 years, making it a notable portfolio addition for financial freedom. The company declared a $1.00 per share quarterly dividend on March 15, which was distributed to shareholders on April 30. JPMorgan Chase & Co. (NYSE:JPM)’s dividend yield on May 12 came in at 3.45%.
On May 3, Oppenheimer analyst Chris Kotowski upgraded JPMorgan Chase & Co. (NYSE:JPM) to Outperform from Perform with a $167 price target, citing loan growth and rising interest rates positioning banks as strong contenders even during a recession. He believes investors should use the recent share weakness as a buy opportunity and noted that JPMorgan Chase & Co. (NYSE:JPM) has over 30% upside potential in the 12-18 months ahead.
According to Insider Monkey’s Q4 database, 107 hedge funds placed long calls on JPMorgan Chase & Co. (NYSE:JPM), up from 101 funds in the earlier quarter. The total stakes held in Q4 amounted to $6.5 billion, compared to $5.6 billion in Q3. Ken Fisher’s Fisher Asset Management owned the biggest position in the company, with 7.4 million shares worth $1.17 billion.
In addition to Johnson & Johnson (NYSE:JNJ), JPMorgan Chase & Co. (NYSE:JPM), and PepsiCo, Inc. (NASDAQ:PEP), elite investors are pouring into JPMorgan Chase & Co. (NYSE:JPM).
Here is what Ariel Investments has to say about JPMorgan Chase & Co. (NYSE:JPM) in its Q4 2021 investor letter:
“In our view, inflation will not just be a 2021 phenomenon. Inflationary expectations are only now working themselves into the labor market with historically low unemployment, resurgent labor unions, and higher wages. These labor cost pressures are only starting to show up in the Consumer Price Index. The most recent Producer Price Index showed a +9% year over year increase, the highest since it was created in 2010. Higher input prices generally lead to rising consumer prices.
“In our view, inflation will not just be a 2021 phenomenon.”
Consumer balance sheets are in excellent shape with lower unemployment and banked stimulus checks. A recent analysis from JP Morgan Chase (JPM) showed average checking accounts have 50% higher balances than pre-Covid. The U.S. money supply as measured by M2 (a calculation that includes cash, checking accounts, and “near cash” such as money market securities) is up +38% versus year-end 2019. Higher consumer cash holdings and higher money supply mean more spending and demand for goods. Some emphasize supply issues to explain current inflation. Going forward, we see very strong demand as well, too much money chasing too few goods.”
8. The Coca-Cola Company (NYSE:KO)
Dividend Yield as of May 12: 2.76%
Number of Hedge Fund Holders: 70
The Coca-Cola Company (NYSE:KO), an American multinational beverage corporation, is a reliable dividend king. 2022 marks the 60th consecutive annual dividend increase at The Coca-Cola Company (NYSE:KO). On April 27, the company declared a $0.44 per share quarterly dividend, in line with previous. The dividend is distributable on July 1, to shareholders of record on June 15.
The Coca-Cola Company (NYSE:KO) reported on April 25 earnings for the first fiscal quarter of 2022. The company announced an EPS of $0.64, beating market estimates by $0.06. Revenue for the period grew 16.44% year-over-year to $10.50 billion, topping analysts’ predictions by about $671 million.
On May 9, BofA added The Coca-Cola Company (NYSE:KO) to the firm’s “US 1” list, which is a compilation of its top investment ideas from the universe of Buy-rated, American securities covered by the firm’s fundamental equity research analysts.
Ken Griffin’s Citadel Investment Group is a significant shareholder of The Coca-Cola Company (NYSE:KO), with 10.6 million shares valued at $632.6 million. Overall, 70 hedge funds were bullish on the stock at the end of December 2021.
Here is what ClearBridge Investments Dividend Strategy has to say about The Coca-Cola Company (NYSE:KO) in its Q4 2021 investor letter:
“Over the last year, we have repositioned our portfolio to navigate the course we see ahead. We added to more defensive areas of the portfolio like consumer staples (Coca-Cola). While the next month or two will likely prove choppy on account of the Omicron variant, we believe that Omicron, like Delta, represents a speed bump on the way to recovery rather than a true change in course. We see strong economic momentum continuing in 2022 and we expect interest rates to rise. After a decade of remarkably low rates, we would not be surprised if this change in direction is accompanied by some fits and starts in the markets. With our emphasis on pricing power, purposeful sector exposure, valuation discipline, and a strong dividend profile, we believe we are well-positioned for the year ahead.”
7. Altria Group, Inc. (NYSE:MO)
Dividend Yield as of May 12: 6.94%
Number of Hedge Fund Holders: 39
Altria Group, Inc. (NYSE:MO) has increased its dividends for 52 years in a row, making it a prominent dividend king to buy for financial freedom. The company manufactures and sells smokeable and oral tobacco products in the United States. Altria Group, Inc. (NYSE:MO) posted on April 28 earnings per share for the first fiscal quarter of 2022, amounting to $1.12, beating market consensus by $0.03.
Altria Group, Inc. (NYSE:MO)’s dividend yield on May 12 stood at 6.94%, significantly higher than the consumer staples average yield of 1.89%. The company declared on February 25 a $0.90 per share quarterly dividend, in line with previous. The dividend was distributed to shareholders on April 29.
On April 29, Deutsche Bank analyst Steve Powers reiterated a Buy recommendation on Altria Group, Inc. (NYSE:MO) and raised the firm’s price target on stock to $60 from $54 following the Q1 results.
Among the hedge funds tracked by Insider Monkey, 39 funds reported owning stakes worth over $1 billion in Altria Group, Inc. (NYSE:MO) at the end of the fourth quarter of 2021, compared to 45 funds in the prior quarter worth about $830 million. Rajiv Jain’s GQG Partners held the biggest position in Altria Group, Inc. (NYSE:MO), with 9.17 million shares valued at $435 million.
Here is what Broyhill Asset Management has to say about Altria Group, Inc. (NYSE:MO) in its Q2 2021 investor letter:
“Altria (MO) shook off the prospects of a ban on menthol and a potential cap on nicotine and gained 20%. We shared our thoughts on these regulations during the quarter, which are available here.
MO Valuation. MO is up ~ 18% YTD (even accounting for the recent sell-off). We expect MO to generate close to $5 in annual FCF per share over the next few years, putting the stock at ~ 10x, which is less than half the market’s multiple today. Over the last decade, shares have traded at an average multiple of 15x and within a range of ~ 10x – 20x (+/-1 standard deviation). The stock yields 7.2% at the current price, close to a 6% premium to treasuries. Historically, shares have traded closer to a 3% premium to the 10Y, which would imply a ~ $75 share price.”
6. Exxon Mobil Corporation (NYSE:XOM)
Dividend Yield as of May 12: 4.15%
Number of Hedge Fund Holders: 71
Exxon Mobil Corporation (NYSE:XOM) is an American multinational oil and gas corporation, providing crude oil, oil products, natural gas, and petrochemicals. The company is also engaged in power generation. Exxon Mobil Corporation (NYSE:XOM) has paid dividends to shareholders consistently for more than 100 years, with dividend increases stretching back to 39 consecutive years.
On April 27, Exxon Mobil Corporation (NYSE:XOM) declared a quarterly dividend of $0.88 per share, in line with previous. The dividend is distributable on June 10, to shareholders of record on May 13. Exxon Mobil Corporation (NYSE:XOM)’s dividend yield on May 12 stood at 4.15%.
Argus analyst Bill Selesky on May 9 maintained a Buy rating on Exxon Mobil Corporation (NYSE:XOM) and raised the firm’s price target on the stock to $104 from $92. The analyst expects Exxon Mobil Corporation (NYSE:XOM) to be a beneficiary of the strong energy market. In addition to that, the company’s positive catalysts include an improving balance sheet, lower capital spending, and greater free cash flow. The analyst lifted his 2022 EPS estimate to $9.52 from $6.40, owing to the projections for continued high commodity prices over the rest of the year. He sees further upside in Exxon Mobil Corporation (NYSE:XOM) shares.
Exxon Mobil Corporation (NYSE:XOM) is a favorite oil stock of institutional investors. According to Insider Monkey’s database, 71 hedge funds held long positions in Exxon Mobil Corporation (NYSE:XOM) at the conclusion of Q4 2021, up from 64 funds in the earlier quarter. Jean-Marie Eveillard’s First Eagle Investment Management owned a prominent stake in the company, worth $1.45 billion.
Like Johnson & Johnson (NYSE:JNJ), JPMorgan Chase & Co. (NYSE:JPM), and PepsiCo, Inc. (NASDAQ:PEP), institutional investors gravitate towards Exxon Mobil Corporation (NYSE:XOM) for dividend income.
Here is what Goehring & Rozencwajg Associates has to say about Exxon Mobil Corporation (NYSE:XOM) in its Q3 2021 investor letter:
“After successfully replacing 25% of Exxon’s board of directors despite owning just 0.02% of the outstanding equity, Engine No. 1, the climate-focused activist hedge fund, met with Chevron’s management late last summer. In discussions that were later described as “cordial,” Chevron executives shared their plan to reduce carbon emissions. Subsequently, Chevron announced new plans to further reduce carbon output, along with their intention to appoint a new director with “environmental expertise.” Although it remains unclear exactly what Engine No. 1 is planning, rumors suggest the fund has contacted other investors, strongly suggesting they intend to launch a second campaign in the not-too-distant future.
What should Chevron expect?
It was recently reported by The Wall Street Journal that Exxon was considering abandoning two massive natural gas projects: the 75 trillion cubic foot (tcf ) Rovuma LNG project (capital cost $30 bn) and the 5 tcf Ca Voi Xanh offshore-Vietnam gas project (capital cost $10 bn). Exxon board members (most likely including the three supported by Engine No. 1) have publicly expressed concerns about both projects.
According to internal reports, these projects are among the highest CO2 producers in Exxon’s pipeline; it is no surprise these projects have been called into question. However, we find the plight of both fields to be perplexing since production would almost certainly be used to displace coal in electricity generation, cutting CO2 emissions by nearly 50%. This fact seems to be lost on the new Exxon board members.”
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Disclosure: None. 10 Dividend Stocks to Buy for Financial Freedom is originally published on Insider Monkey.
