In this article, we will take a look at some of the most promising stocks that pay dividends.
During a time of great excitement about AI-driven capital gains, it’s crucial to remember that dividends have consistently played a vital role in total returns. Over the long term, dividends become even more significant. Looking back at the past few decades, approximately 55% of market returns from 1987 to the end of 2023 have come from reinvested dividends.
Dividends are a long-term investment strategy, and the benefits take time to materialize. For example, a dollar invested in the broader market in 1927 without reinvesting dividends would be worth $243 today, but if dividends were reinvested, that same dollar would be worth $3,737. Fortunately, you don’t need a century to see the potential growth in dividend stocks, as the outlook for the near future is improving. According to a report by AGF Investments, in the second half of 2024, global monetary easing has led to lower bond yields, making fixed income less attractive compared to dividend-paying stocks. In addition, companies with high dividend payouts often have more leverage, and lower bond yields help them manage interest expenses, boosting their overall financial performance, which in turn would contribute to dividend growth.
Also read: 8 Unstoppable Dividend Stocks to Invest in
According to a report by J.P. Morgan, global equities are on the brink of a significant period of dividend growth, not just due to a cyclical rise in payouts but also because of a more permanent increase in dividend momentum. Over the past two decades, global dividends per share have grown at an annual rate of 5.6%, but J.P. Morgan’s analysts now predict this rate will accelerate to 7.6% in the future.
The main factor driving this increased dividend growth is the low starting point for payout ratios (dividends relative to earnings). In 2020, during the pandemic, an unusual number of companies reduced their dividends. In fact, global dividends dropped by 12%, a sharper decline than during the Global Financial Crisis. This response was reasonable given the uncertain environment.
Since then, equity markets have rebounded strongly, with earnings surging, particularly from Big Tech and, more recently, AI. Dividends, typically set by cautious boards, tend to lag behind earnings during these surges. As a result, payout ratios are now close to 25-year lows, meaning companies are paying out less than historical averages, as reported by J.P. Morgan. Simply returning to more typical payout levels could result in an additional 2% growth annually over the next five years. This recovery is already taking shape, as global dividend growth has outpaced earnings growth in seven of the past eight quarters.
Investors and analysts both support companies that have raised their payouts. Companies that consistently raise their dividends typically manage economic downturns better because they have strong business models, solid balance sheets, and promising earnings potential. These qualities make them attractive to investors, and historical data shows that the market tends to reward them. Stocks of companies that increase dividends often outperform the broader market while experiencing lower volatility. According to a report by AGF Investments, the companies in the broader market that grew their dividend between January 1990 and August 2024 grew by 12.1%, compared with an 11% return of companies that pay no dividends and a 10.8% return of dividend cutters. With market conditions improving, it’s not surprising that an increasing number of companies are beginning to pay dividends.
Photo by Sharon McCutcheon on Unsplash
Our Methodology:
To compile this article, we first scanned a list of stocks known for their consistent dividend track records and sustained shareholder payouts over an extended period. This group reflects stability and long-term performance in dividend payouts. From this list, we picked 10 companies with the highest number of hedge fund investors, according to Insider Monkey’s database of Q3 2024. The stocks are ranked in ascending order of the number of hedge funds having stakes in them.
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. NIKE, Inc. (NYSE:NKE)
Number of Hedge Fund Holders: 75
NIKE, Inc. (NYSE:NKE) is an Oregon-based apparel and footwear company that offers products for men, women, and children. In fiscal Q2 2025, the company delivered mixed financial results, reporting $12.35 billion in revenue, a 7.7% decline from the same period last year. Wholesale revenue fell by 3% year-over-year to $6.9 billion. Meanwhile, inventory remained stable at $8.0 billion, as increased unit volumes were offset by lower input costs and shifts in the product mix.
Despite these challenges, NIKE, Inc. (NYSE:NKE) maintains a solid financial position, making it appealing to income-focused investors. The company ended the quarter with $7.9 billion in cash and cash equivalents, reflecting a 1% increase from the previous year. It also returned $1.6 billion to shareholders through dividends and share repurchases. With 23 consecutive years of dividend growth, NIKE is one of the most promising stocks that pay dividends. The company currently offers a quarterly dividend of $0.40 per share and has a dividend yield of 2.08%, as of January 30.
NIKE, Inc. (NYSE:NKE) maintains its leadership in the global sportswear market, holding a 16.4% share, according to Euromonitor. This dominance stems from decades of strong brand-building and effective marketing since its founding in 1964. The company continues to strengthen its brand through compelling marketing campaigns and strategic storytelling, bolstered by endorsements from elite athletes like LeBron James and Cristiano Ronaldo. Additionally, long-term partnerships, such as its extended agreement with the NFL as the exclusive uniform provider until 2038, further reinforce its market presence. The company’s commitment to innovation also helps attract a diverse consumer base.
The number of hedge funds tracked by Insider Monkey owning stakes in NIKE, Inc. (NYSE:NKE) at the end of Q3 2024 jumped to 75, from 66 in the previous quarter. These stakes have a collective value of over $5 billion.
9. Union Pacific Corporation (NYSE:UNP)
Number of Hedge Fund Holders: 78
Union Pacific Corporation (NYSE:UNP) is an American transport company, based in Nebraska. In its recently announced Q4 2024 earnings, the company posted revenue of $6.12 billion, which fell by 1% from the same period last year. However, the company experienced a 5% increase in revenue carloads, contributing to a stronger financial performance. Its operating ratio improved to 58.7%, reflecting a 220-basis-point enhancement, despite a 70-basis-point setback from the ratification of a crew staffing agreement. In addition, operating income rose by 5%, reaching $2.5 billion.
Union Pacific Corporation (NYSE:UNP) runs an extensive railroad network across 23 states and is actively expanding its mainline and terminal capacities by constructing new sidings and extending existing ones. These initiatives are particularly important in high-growth areas such as the Pacific Northwest, where enhancements are being made to support increased exports of soda ash and grain. In the Southwest, efforts are focused on strengthening intermodal services. In addition, the company is incorporating advanced technologies, including GPS tracking for containers and rail pulse systems, to enhance service reliability, offer real-time tracking, and improve communication with customers.
Union Pacific Corporation (NYSE:UNP)’s cash position also came in strong. In FY24, the company generated over $9.3 billion in operating cash flow. It ended the quarter with over $1 billion available in cash and cash equivalents. This strong cash position has enabled the company to pay regular dividends to shareholders for 125 years in a row. In addition, it has raised its payouts for 18 consecutive years, which makes UNP one of the most promising stocks that pay dividends. The company pays a quarterly dividend of $1.34 per share and has a dividend yield of 2.16%, as of January 30.
As of the end of Q3 2024, 78 hedge funds tracked by Insider Monkey held stakes in Union Pacific Corporation (NYSE:UNP), compared with 82 in the previous quarter. The consolidated value of these stakes is over $4.48 billion.
8. Johnson & Johnson (NYSE:JNJ)
Number of Hedge Fund Holders: 81
Johnson & Johnson (NYSE:JNJ) ranks eighth on our list of the most promising stocks according to hedge funds. The New Jersey-based multinational pharmaceutical company specializes in a wide range of biotech and medical products and offers related services to consumers.
Johnson & Johnson (NYSE:JNJ) is emphasizing its commitment to innovation and expansion through recent acquisitions. It has unveiled plans to invest over $14 billion in acquiring Intra-Cellular Therapies, reinforcing its focus on treatments for central nervous system disorders. The acquisition will be funded through a combination of cash reserves and debt, with the transaction expected to be finalized later this year. This marks the most significant biotech acquisition in over a year, indicating a resurgence in healthcare mergers and acquisitions following a slowdown in 2024 when major pharmaceutical companies concentrated on integrating their previous post-pandemic purchases.
Johnson & Johnson (NYSE:JNJ) reported its Q4 2024 earnings, recording $22.5 billion in revenue, reflecting a 5.2% increase from the same quarter the previous year. As a leading healthcare company, it continues to enhance treatment standards for conditions with significant unmet needs, such as multiple myeloma, lung cancer, inflammatory bowel disease, and heart failure. Its MedTech segment experienced a 6.2% rise in global operational sales, with net acquisitions and divestitures contributing 1.5% to this growth. The Cardiovascular division benefited from strong demand for electrophysiology products and Abiomed, while the General Surgery segment saw growth driven by wound closure products.
Johnson & Johnson’s (NYSE:JNJ) dividend growth makes it a reliable investment option for income investors. The company has been growing its payouts for 62 consecutive years and currently offers a quarterly dividend of $1.24 per share. The stock has a dividend yield of 3.26%, as of January 30.
Insider Monkey’s database of Q3 2024 indicated that 81 hedge funds held stakes in Johnson & Johnson (NYSE:JNJ), up from 80 in the previous quarter. These stakes have a collective worth of over $5.4 billion. With over 7.5 million shares, Fisher Asset Management was the company’s leading stakeholder in Q3.
7. The Home Depot, Inc. (NYSE:HD)
Number of Hedge Fund Holders: 82
The Home Depot, Inc. (NYSE:HD) is an American home improvement company that is engaged in the sale of building materials and home improvement products. The company boasts over 2,300 stores in the US, Canada, and Mexico.
The US housing market has faced challenges in recent years due to rising interest rates, higher mortgage costs, and inflationary pressures affecting consumers. However, a recent decline in interest rates is expected to offer some relief. On January 15, The Home Depot, Inc. (NYSE:HD) saw its stock climb 3.38% following a lower-than-expected core Consumer Price Index (CPI) for December. As inflation continues to ease, the broader economy stands to benefit, with Home Depot likely to see positive effects as well.
The home improvement industry is vast and highly fragmented, with an estimated annual value of $1 trillion. While The Home Depot, Inc. (NYSE:HD) is the largest company in the sector, it holds only a 15% market share. This leaves significant room for growth, as the company has the potential to capture a larger share from smaller competitors that struggle to compete with its strong brand presence, extensive inventory, and seamless omnichannel capabilities.
The Home Depot, Inc. (NYSE:HD) maintained a solid financial position in fiscal year 2024, generating more than $15 billion in operating cash flow during the first nine months. This strong cash flow reinforces the company’s ability to uphold its reputation as a dependable dividend payer. The company has consistently raised its dividend payouts for 14 consecutive years, which makes it one of the most promising stocks that pay dividends. It currently offers a quarterly dividend of $2.25 per share and has a dividend yield of 2.18%, as of January 30.
Of the 900 hedge funds tracked by Insider Monkey at the end of Q3 2024, 82 funds held stakes in The Home Depot, Inc. (NYSE:HD), down from 86 in the previous quarter. These stakes have a total value of roughly $7.6 billion.
6. Exxon Mobil Corporation (NYSE:XOM)
Number of Hedge Fund Holders: 86
Exxon Mobil Corporation (NYSE:XOM) is an American oil and gas company that is engaged in the exploration, production, refining, and distribution of petroleum products. The company continues to be a dominant force in the global fossil fuel sector while expanding its investments in low-carbon energy. As part of its 2030 strategy, the company plans to invest up to $30 billion in low-emission projects between 2025 and 2030. In addition, the company has secured the largest offshore carbon dioxide storage site in the US through an agreement with the Texas General Land Office. The company is also advancing efforts to build the world’s largest low-carbon hydrogen production facility, with a projected capacity of up to 1 billion cubic feet of hydrogen per day.
Exxon Mobil Corporation (NYSE:XOM) posted revenue of $90.02 billion, exceeding analysts’ projections by $1.66 billion. Its strong financial performance was reflected in the $17.6 billion generated in operating cash flow and $11.3 billion in free cash flow for the quarter. Moreover, it returned $9.8 billion to shareholders through dividends and stock buybacks. This solid cash position enabled the company to extend its streak of annual payout increases to 42 consecutive years.
On January 30, Exxon Mobil Corporation (NYSE:XOM) declared a quarterly dividend of $0.99 per share, which was in line with its previous dividend. The stock has a dividend yield of 3.71%.
Insider Monkey’s database of Q3 2024 indicated that 86 hedge funds owned stakes in Exxon Mobil Corporation (NYSE:XOM), compared with 92 a quarter earlier. These stakes have a total value of nearly $7 billion. First Eagle Investment Management was one of the company’s leading stakeholders.
5. Walmart Inc. (NYSE:WMT)
Number of Hedge Fund Holders: 88
Walmart Inc. (NYSE:WMT) is an American retail corporation, based in Arkansas. The company operates a chain of hypermarkets, discount stores, and grocery stores across the US. The company is strengthening its digital presence, driving revenue through membership fees, commissions from third-party sellers on its online platform, and advertising payments from businesses looking to engage its customer base. This expansion in higher-margin digital services is playing a key role in increasing the company’s operating income.
Walmart Inc. (NYSE:WMT) is successfully utilizing Generative AI to improve both customer interactions and operational efficiency. Its AI-powered tool, My Assistant, has already supported over 50,000 employees by answering more than 1.5 million inquiries since its introduction. As engagement continues to rise, the company has expanded My Assistant’s availability to 13 more countries.
Walmart Inc. (NYSE:WMT), one of the most promising dividend stocks, maintains a strong cash position. In the first nine months of 2024, the company generated $22.9 billion in operating cash flow, $3. billion higher than the previous year. Its free cash flow also grew by $1.9 billion to $6.2 billion during this period. This cash position enabled the company to raise its payouts for 51 consecutive years. The company’s quarterly dividend comes in at $0.2075 per share and has a dividend yield of 0.85%, as of January 30.
As per Insider Monkey’s database of Q3 2024, 88 hedge funds held stakes in Walmart Inc. (NYSE:WMT), compared with 95 in the previous quarter. These stakes have a consolidated value of over $9.7 billion.
4. Bank of America Corporation (NYSE:BAC)
Number of Hedge Fund Holders: 98
Bank of America Corporation (NYSE:BAC) is an American multinational investment bank and financial services holding company. In the fourth quarter of 2024, reported revenue of $25.3 billion, up from $22 billion in the same quarter a year earlier. Net income climbed to $6.7 billion, more than doubling the $3.1 billion recorded in the prior-year period. The bank also grew its customer base by adding 213,000 new consumer checking accounts, marking six consecutive years of quarterly expansion. In addition, it continued to reward shareholders by distributing $2 billion in dividends.
Bank of America Corporation (NYSE:BAC) benefits from several competitive advantages that strengthen its position in the industry and protect it from both traditional banks and fintech rivals. Its comprehensive distribution network, which blends a strong digital platform with a broad branch presence, helps the bank grow its low-cost deposit base and attract new customers, driving revenue. Moreover, its large scale enables efficient cost management, ensuring steady profitability. The bank’s established brand further enhances its attractiveness to both current and prospective clients. In the past 12 months, the stock has surged by over 36%.
Bank of America Corporation (NYSE:BAC) is one of the most promising dividend stocks as the company has never missed a dividend in 27 years. It currently offers a quarterly dividend of $0.26 per share and has a dividend yield of 2.25%, as of January 30.
The number of hedge funds tracked by Insider Monkey owning stakes in Bank of America Corporation (NYSE:BAC) grew to 98 in Q3 2024, from 92 in the previous quarter. These stakes are worth over $40.6 billion in total. With nearly 798 million shares, Warren Buffett’s Berkshire Hathaway was the company’s leading stakeholder in Q3.
3. Eli Lilly and Company (NYSE:LLY)
Number of Hedge Fund Holders: 106
Eli Lilly and Company (NYSE:LLY) is an Indiana-based pharmaceutical company that manufactures and develops a wide range of medicines for serious ailments. The stock has performed exceptionally well in recent years, driven by the success of its glucagon-like peptide-1 (GLP-1) receptor agonist drug portfolio. In the past 12 months, LLY has surged by over 25.6%.
In fiscal Q4 2024, Eli Lilly and Company (NYSE:LLY) generated $11.4 billion in revenue, reflecting a 20.5% year-over-year increase. The growth was primarily fueled by strong performances from Mounjaro and Zepbound, along with a notable 17% increase in non-incretin revenue. This overall expansion, driven by its oncology, immunology, and neuroscience segments, was compared to Q3 2023 results.
Aristotle Atlantic Partners, LLC made the following comment about LLY in its Q3 2024 investor letter.
“Eli Lilly and Company (NYSE:LLY) is a leading pharmaceutical company that develops diabetes, oncology, immunology and neuroscience medicines. The company generates over half of its revenue in the U.S. from its leading drugs Trulicity, Verzenio and Taltz. The company operates in a single business segment: human pharmaceutical products.
Eli Lilly has a deep pipeline in treatment areas focused on metabolic disorders, oncology, immunology and central nervous system disorders. Currently, there are two phase-three assets: orforglipron, an oral GLP-1, and retatrutide, a triple incretin agonist, which could possibly expand upon the potential success of Mounjaro. We believe that Mounjaro has the potential to commercialize beyond Type 2 diabetes and obesity, potentially in the areas mentioned above of heart disease, sleep apnea, fatty liver disease and chronic kidney disease. We believe the premium valuation is supported by this outsized growth profile.”
In December 2024, Eli Lilly and Company (NYSE:LLY) declared a 15.4% hike in its quarterly dividend to $1.50 per share. This marked the company’s 11th consecutive year of dividend growth, which makes LLY one of the most promising stocks that pay dividends. The stock supports a dividend yield of 0.74%, as of January 30.
The number of hedge funds tracked by Insider Monkey holding stakes in Eli Lilly and Company (NYSE:LLY) increased to 106 in Q3 2024, from 100 in the previous quarter. The total value of these holdings now exceeds $18.5 billion.
2. UnitedHealth Group Incorporated (NYSE:UNH)
Number of Hedge Fund Holders: 112
UnitedHealth Group Incorporated (NYSE:UNH) is an American health insurance company, based in Minnesota. In 2024, the company encountered substantial challenges, including a $6 billion setback from Medical Cost Ratios (MCR) and the effects of the Inflation Reduction Act (IRA) on expensive medications. However, UnitedHealth’s proactive steps, such as adjusting pricing strategies and continuing to invest in Medicare Advantage (MA), have allowed it to handle regulatory and market pressures more effectively. Moving into 2025, UNH plans to tackle these challenges by focusing on regulatory changes in MA, scaling AI-driven models, and enhancing operational efficiencies across its commercial and Medicare sectors. The stock has surged by over 6% in the past 12 months.
UnitedHealth Group Incorporated (NYSE:UNH) recently revealed its FY24 earnings, exceeding investor expectations with an outstanding performance. It reported revenue of $400 billion, reflecting an 8% increase from the previous year, driven by expanded services throughout the organization. The company’s operational earnings for the year reached $32.3 billion. After excluding expenses related to responding to a cyberattack and challenges in South America, adjusted operational earnings were $34.4 billion.
UnitedHealth Group Incorporated (NYSE:UNH) met investor expectations with impressive cash flow results. For the full year, the company generated $24.2 billion in cash flows from operations, which is 1.6 times its net income. Throughout 2024, it returned over $16 billion to shareholders via dividends and stock buybacks. In Q4, its return on equity was 23.7%, showcasing strong earnings and an efficient capital structure.
UnitedHealth Group Incorporated (NYSE:UNH) also has a solid dividend history, having started annual dividend payments in 1990 and moving to quarterly payouts in 2010. Since then, it has consistently raised its dividends, making it one of the top stocks for reliable dividends. It currently pays a quarterly dividend of $2.10 per share and has a dividend yield of 1.55%, as of January 30.
1. Broadcom Inc. (NASDAQ:AVGO)
Number of Hedge Fund Holders: 128
Broadcom Inc. (NASDAQ:AVGO) is an American multinational semiconductor company that offers a wide range of semiconductor and infrastructure software products. In its Q4 2024, the company reported revenue of $14.05 billion, which showed a significant 51% growth from the same period last year. Semiconductor revenue reached an all-time high of $30.1 billion, with AI revenue soaring by 220% compared to the previous year, totaling $12.2 billion. This exceptional growth was driven by the company’s cutting-edge AI XPUs and Ethernet networking solutions. For fiscal year 2024, adjusted EBITDA increased by 37% year-over-year, hitting a record $31.9 billion.
Broadcom Inc. (NASDAQ:AVGO) is drawing considerable attention from investors thanks to its pivotal role in powering products in various sectors, including data centers and smartphones. Its technology supports more than 99% of internet traffic, underscoring its leadership in networking. Furthermore, the company’s acquisition of VMware, a cloud virtualization firm, a year ago has bolstered its market position. VMware’s operating margin has now reached 70%, and the company is on pace to surpass its goal of generating over $8.5 billion in adjusted EBITDA within three years.
Broadcom Inc. (NASDAQ:AVGO) leveraged its robust cash reserves to boost its dividend. In the most recent quarter, the company generated $5.6 billion in operating cash flow and $5.48 billion in free cash flow, accounting for 39% of its total revenue. With 14 consecutive years of dividend growth, Broadcom is considered one of the most promising dividend stocks. The company’s per-share dividend comes in at $0.59 every quarter for a dividend yield of 1.07%, as of January 30.
Overall Broadcom Inc. (NASDAQ:AVGO) ranks first on our list of the most promising dividend stocks. While we acknowledge the potential for AVGO 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 AVGO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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