In this article, we will discuss 10 safe dividend stocks with high yields. To skip our analysis of dividend investing, you can go directly to 5 Safe Dividend Stocks with High Yields.
According to a report published by Global X, between 1960 to 2017, stocks paying high dividends outperformed the S&P 500 in terms of absolute and risk-adjusted returns. On an annualized basis, the total return of these stocks was roughly 3.0% higher than the S&P 500. Moreover, a 6.4% average yearly dividend yield was generated by high dividend stocks during the same period.
Similarly, Wellington Management, in partnership with Hartford Funds, concluded that high-yielding stocks outperformed the S&P 500 index 77.8% of the time between 1930 and 2020, while low-yielding stocks outperformed the S&P 500 index 44.4% of the time.
A high-yield stock has no precise definition. Most investors, however, would identify it as a stock with a higher dividend yield than a typical benchmark, such as the S&P 500 Index. The S&P 500 dividend yield averaged less than 1.5% in 2021, while the 10-year U.S. Treasury note yield fluctuated between 1.25% and 1.75%. Dividend stocks could be appealing to investors searching for companies that can withstand uncertain market and economic conditions. Philip Morris International Inc. (NYSE:PM), Verizon Communications Inc. (NYSE: V.Z.), and Exxon Mobil Corporation (NYSE:XOM) are some of the popular stocks that have seen over ten consecutive years of dividend growth.
Our Methodology
In this article, we will be looking at 10 safe dividend stocks with high yields. To prepare our list, we selected stocks with over ten consecutive years of dividend growth and that offer a dividend yield of more than 4%. Stocks that passed these filters were then sorted in ascending order in terms of the number of hedge funds having a stake in these respective corporations. Insider Monkey has a proprietary database tracking the performance of 867 hedge funds as of Q3 2021.
Safe Dividend Stocks with High Yields
10. Valero Energy Corporation (NYSE:VLO)
Dividend Yield as of December 29: 5.46%
Number of Hedge Funds: 32
Valero Energy Corporation is a Fortune 500 company headquartered in San Antonio, Texas, with a headcount of around 10,000 employees. The corporation is the world’s biggest independent refiner with 15 refining sites spread across Canada, the U.S., and the U.K. Valero Energy Corporation (NYSE:VLO) happens to be the second-largest producer of environment-friendly high-octane renewable fuel, corn ethanol.
Valero Energy Corporation (NYSE:VLO) reported its Q3 2021 results on October 21. The company posted an EPS of $1.22, beating the analysts’ estimate of 92 cents. Valero Energy Corporation (NYSE:VLO) also beat the revenue estimate of $23.97 billion by $5.55 billion.
In a report issued to investors on October 26, Bill Selesky at Argus increased the target price on Valero Energy Corporation (NYSE:VLO) from $83 to $93 and reiterated a Buy rating on the stock. The analyst highlighted the strong Q3 results that were a result of higher than expected sales from all divisions of the business. Selesky also anticipates higher gasoline demand to continue during the next year, along with added demand for diesel and jet fuel. He expects a further boost in the top line and bottom line in the upcoming quarters.
Apart from Valero Energy Corporation (NYSE:VLO), companies like Philip Morris International Inc. (NYSE:PM), Verizon Communications Inc. (NYSE: V.Z.), and Exxon Mobil Corporation (NYSE:XOM) also offer dividend yields of over 4%, as of December 29.
9. Cardinal Health Inc. (NYSE:CAH)
Dividend Yield as of December 29: 4.05%
Number of Hedge Funds: 36
Cardinal Health Inc. (NYSE:CAH) is a distributor of pharmaceuticals along with medical and laboratory products and provides data and performance solutions to the healthcare industry. The Dublin, Ohio-based company is the 14th biggest company in the U.S. in terms of revenue.
Cardinal Health Inc. (NYSE:CAH) announced a quarterly dividend of 49 cents per share on November 4. Cardinal Health happens to be a member of the prestigious Dividend Aristocrat List as well. The list comprises companies in the S&P 500 Index that have increased their dividends for the past 25 years consecutively. Cardinal Health Inc. (NYSE:CAH) has raised its annual dividend for the past 34 consecutive years.
Cardinal Health Inc. (NYSE:CAH) reported mixed Q1 FY22 results on November 9. The company reported revenue of $43.97 billion, surpassing the analysts’ estimate of $41.93 billion. However, the company missed the consensus EPS estimate of $1.33 by reporting EPS of $1.29 due to inflationary pressure increasing cost, and reducing margins of the medical segment. The corporation reiterated its FY22 EPS view of $5.60 to $5.90. The midpoint of $5.75 is just one cent lower than the consensus estimate of $5.76. In the quarterly results, Cardinal Health Inc. (NYSE:CAH) also authorized an additional $3 billion stock buyback plan, which will further boost the shareholder return in the future.
8. Prudential Financial, Inc. (NYSE:PRU)
Dividend Yield as of December 29: 4.23%
Number of Hedge Funds: 33
Prudential Financial, Inc. (NYSE:PRU) is a provider of financial products, insurance, and investment management services. The Newark, New Jersey-based company is one of the biggest insurance companies in the U.S. The corporation has catered to retail and corporate customers in the U.S. and 40 other countries since starting its operations nearly 145 years ago. Prudential Financial, Inc. (NYSE:PRU) has been increasing its annual dividend for the past 13 consecutive years and most recently declared a quarterly dividend of $1.15 per share on November 9.
In addition, Prudential Financial, Inc. (NYSE:PRU) approved a stock repurchase program of $1.5 billion that will be executed from January 1, 2022, to December 1, 2022. Out of the 867 hedge funds being tracked by Insider Monkey, 33 held a stake in Prudential Financial Inc. (NYSE:PRU) at the end of Q3, up from 28 in the preceding quarter.
In a research note issued on December 2, Alex Scott at Goldman Sachs initiated coverage on Prudential Financial, Inc. (NYSE:PRU) with a Neutral rating and a price target of $115. The analyst appreciated the corporation’s plan of shifting its focus towards lower capital-intensive businesses. However, the analyst highlighted the need to do mergers and acquisitions (M&A) for better growth prospects in the future.
7. LyondellBasell Industries N.V. (NYSE:LYB)
Dividend Yield as of December 29: 4.93%
Number of Hedge Funds: 39
LyondellBasell Industries N.V. (NYSE:LYB) is a chemical company and the biggest licensor of polyethylene (P.E.) and polypropylene (P.P.) globally. The Dutch company headquartered in Houston, Texas, and Rotterdam paid out a quarterly dividend of $1.13 per share on December 6. This translates into a forward dividend yield of 4.93% as of December 29.
In a research note issued on November 2, Michael Sison at Wells Fargo issued an Overweight rating on LyondellBasell Industries N.V. (NYSE:LYB) stock with a price target of $120. LyondellBasell Industries N.V. (NYSE:LYB) has come under pressure as the cost of polypropylene (P.P.) and polyethylene (P.E.) has increased because of higher energy and feedstock costs. However, natural gas prices are expected to decline in 2022, according to the Energy Information Agency (EIA) in the U.S. As compared to other companies operating in the industry, Sison thinks that LyondellBasell Industries N.V. (NYSE:LYB) is in the best position to weather the near-term pressure on costs.
Out of the 867 hedge funds in Insider Monkey’s database, 39 reported owning a stake in LyondellBasell Industries N.V. (NYSE:LYB) at the end of Q3. Eagle Capital Management is the leading shareholder in the company, with a stake worth $302.5 million.
6. International Business Machines Corporation (NYSE:IBM)
Dividend Yield as of December 29: 4.98%
Number of Hedge Funds: 41
International Business Machines Corporation (NYSE:IBM) manufactures and sells software, hardware, and middleware in over 170 countries. The Armonk, New York-based company founded in 1911, holds the record for most patents generated by a business in the U.S. annually for the past 28 consecutive years. International Business Machines Corporation (NYSE:IBM) is also a member of the Dow Jones Industrial Index (DJIA) and employs over 345,000 employees across the globe. The entity paid out a quarterly dividend of $1.64 per share on December 10 and has been increasing its annual dividend for the past 22 years.
Under the leadership of CEO Arvind Kumar, International Business Machines Corporation (NYSE:IBM) is undergoing a right-sizing exercise, shifting its focus from a legacy hardware and software company towards an entity that is relied on artificial intelligence (A.I.) and cloud. The organization spun off its managed infrastructure services Kyndryl Holdings, Inc. (NYSE: K.D.) in October 2021. Meanwhile, with the complete integration of Red Hat, International Business Machines Corporation (NYSE:IBM) is geared up to fight for its place in the cloud computing industry.
Keeping in view the strategic shift, Sami Badri at Credit Suisse gave International Business Machines Corporation (NYSE:IBM) an Outperform rating with a target price of $164.29 on December 7.
In addition to International Business Machines Corporation (NYSE:IBM), Philip Morris International Inc. (NYSE:PM), and Verizon Communications Inc. (NYSE: V.Z.), Exxon Mobil Corporation (NYSE:XOM) is one of the popular companies that has increased its dividends for the past ten consecutive years.
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Disclose. None. 10 Safe Dividend Stocks with High Yields is originally published on Insider Monkey.
