In this article, we take a look at 10 stocks with over 15 years of dividend hikes. If you want to skip our detailed analysis of these stocks, go directly to the 5 Stocks with Over 15 Years of Dividend Hikes.
There is more to dividend stocks than just their yields. There are a few other important metrics to consider before making the decision to invest in a stock that pays dividends, such as, price-to-book ratio, payout ratio, and the number of years the stock has posted consistent dividend growth.
Let’s take a look at how dividend stocks have performed over the past few decades by considering the returns on the S&P 500 Index. During the 1940s the dividend contribution to the total return on the S&P 500 was about 67%. This dropped to 30% in the 1950s, and then rose to 44% in the 1960s. The returns from dividends on the S&P 500 Index rose as high as 73% in the 1970s and then sharply fell to 28% in the 1980s. It is evident that based on the economic conditions and market situations at any point in time, the relative performance of different stocks has fluctuated and will continue to do so. However, this reality does not hold back investors from taking a leap of faith and investing heavily in dividend stocks, which make up a fair majority of many investors’ portfolios today.
Investing has become difficult by the day, even for the smart money. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 86 percentage points since March 2017. Between March 2017 and July 2021, our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by more than 86 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
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10. Air Products & Chemicals, Inc. (NYSE:APD)
Number of Hedge Fund Holders: 40
Number of Years of Dividend Increases: 39
Dividend Yield: 2.05%
Air Products and Chemicals, Inc. (NYSE:APD) provides atmospheric gases, process, and specialty gases, equipment, and services worldwide. The company was founded in 1940 and is headquartered in Allentown, Pennsylvania. Air Products and Chemicals, Inc. (NYSE:APD) is ranked tenth on 10 stocks with over 15 years of dividend hikes.
This October, BMO Capital analyst John McNulty raised his price target on Air Products and Chemicals, Inc. (NYSE:APD) to $338 from $312 and reiterated an Outperform rating on the shares. The analyst cites the company’s plan for a $4.5 billion new blue hydrogen clean energy complex to be constructed in Louisiana, adding that the size of this project and its “low-risk location” should give investors comfort in the strength of its backlog.
By the end of the second quarter of 2021, 40 hedge funds out of the 873 funds tracked by Insider Monkey held stakes in Air Products and Chemicals, Inc. (NYSE:APD).
Like Chevron Corporation (NYSE:CVX), Pepsico, Inc. (NASDAQ:PEP), AT&T Inc. (NYSE:T), and International Business Machines Corp. (NYSE:IBM), Air Products and Chemicals, Inc. (NYSE:APD) is a stock that has been increasing its dividends consistently.
9. Caterpillar Inc. (NYSE:CAT)
Number of Hedge Fund Holders: 62
Number of Years of Dividend Increases: 26
Dividend Yield: 2.23%
Caterpillar Inc. (NYSE:CAT) manufactures and sells construction and mining equipment, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives worldwide. The company operates through the following segments: Construction Industries, Resource Industries, Energy and Transportation, Financial Products, and All Other. Caterpillar Inc. (NYSE:CAT) was founded in 1925 and is headquartered in Deerfield, Illinois. The stock ranks ninth on our list of the 10 stocks with over 15 years of dividend hikes.
This October, Cowen analyst Matt Elkott initiated coverage of Caterpillar Inc. (NYSE:CAT) with an Outperform rating and $241 price target.
Oakmark Funds, an investment management firm, published its “Oakmark Fund” second quarter 2021 investor letter, in which it mentioned Caterpillar Inc. (NYSE:CAT). Here’s their take on the stock:
“Having followed the company closely for north of a decade, Caterpillar is a name we know well. For much of its history, the operating efficiency of the company left much to be desired, but its underlying competitive position was rarely in doubt. A series of actions over the past decade (e.g., LEAN implementation, improved service mix, optimized manufacturing footprint) helped to narrow the gap between Caterpillar’s potential and its realized results, driving material margin expansion and strong share price performance. In our view, the company remains among the highest quality industrials in the market, but its underlying business is cyclical, which can translate to large swings in both performance and investor sentiment over short time periods. Our ability to focus on the long-term, sustainable earnings power of a business (rather than getting distracted by near-term fluctuations) is our most significant edge when investing in cyclical businesses. Due to the inherent volatility in Caterpillar’s end markets and operating performance, we suspect we’ll have a future opportunity to own this high-quality business at a more attractive price once the cycle turns and today’s enthusiasm wears off.”
Caterpillar Inc. (NYSE:CAT) has been increasing its dividends consistently for 26 years now. Other stocks that have been consistent with their dividends include Chevron Corporation (NYSE:CVX), Pepsico, Inc. (NASDAQ:PEP), AT&T Inc. (NYSE:T), and International Business Machines Corp. (NYSE:IBM).
8. Raytheon Technologies Corp (NYSE:RTX)
Number of Hedge Fund Holders: 53
Number of Years of Dividend Increases: 28
Dividend Yield: 2.24%
Raytheon Technologies Corp (NYSE:RTX) operates as an aerospace and defense company that provides systems and services for commercial, military, and government customers worldwide.
In August, Morgan Stanley analyst Kristine Liwag raised Raytheon Technologies Corp (NYSE:RTX) price target to $110 from $97 and reiterated an Overweight rating on the shares.
53 hedge funds out of the 873 elite funds tracked by Insider Monkey held stakes in Raytheon Technologies Corp (NYSE:RTX) by the end of the second quarter of 2021. The value of these stakes was more than $2.1 billion. This is compared to 58 positions in the first quarter of 2021, with stakes worth $2.49 billion.
ClearBridge Investments, an investment management firm, published its “Large Cap Value Strategy” second quarter 2021 investor letter. The firm shared its stance on Raytheon Technologies Corp (NYSE:RTX). Here’s what the experts at ClearBridge had to say:
“Broader market leadership was a relative benefit for the ClearBridge Large Cap Value Strategy, which outperformed the Russell 1000 Value Index in the second quarter… Separately, Raytheon Technologies benefited from an improving health outlook that is contributing to a faster than anticipated recovery in air travel, which should drive stronger results for Raytheon’s commercial aerospace business.”
Raytheon Technologies (NYSE:RTX) is a famous dividend stock. Other stocks, some of which are dividend kings too, are Chevron Corporation (NYSE:CVX), Pepsico, Inc. (NASDAQ:PEP), AT&T Inc. (NYSE:T), and International Business Machines Corp. (NYSE:IBM).
7. General Dynamics Corporation (NYSE:GD)
Number of Hedge Fund Holders: 37
Number of Years of Dividend Increases: 24
Dividend Yield: 2.29%
General Dynamics Corporation (NYSE:GD) operates as an aerospace and defense company worldwide. The company operates through four segments: Aerospace, Marine Systems, Combat Systems, and Technologies.
This September, Goldman Sachs analyst Noah Poponak upgraded General Dynamics Corporation (NYSE:GD) to Neutral from Sell with a $176 price target.
As of the second quarter of 2021, General Dynamics Corporation (NYSE:GD) generated revenues of $9.22 billion. The company also reported earnings per share of $2.61, beating EPS estimates by $0.06.
By the end of the second quarter of 2021, General Dynamics Corporation (NYSE:GD) was present in 37 hedge funds’ investment portfolios.
Oakmark Funds, an investment management firm, published its “Oakmark Global Fund” first quarter 2021 investor letter, in which it mentioned General Dynamics Corporation (NYSE:GD). Here’s what the firm thinks about General Dynamics Corporation (NYSE:GD):
“The second new U.S. equity purchase was General Dynamics, a leading U.S. defense contractor and owner of the world’s premier business jet franchise (Gulfstream). We were able to purchase this high-quality and durable business at a meaningful discount to our estimate of its intrinsic value after a series of near-term concerns hurt its share price. Taking a longer term view, the company’s business jet franchise should benefit from a multi-year investment program in new, differentiated product. Also, its free cash flow conversion is set to improve materially and the company is poised to benefit from a highly visible ramp up in revenue related to next generation nuclear-powered submarines. As these positives come into clearer view, we expect sentiment to improve, along with the company’s share price.”
6. AFLAC Incorporated (NYSE:AFL)
Number of Hedge Fund Holders: 33
Number of Years of Dividend Increases: 39
Dividend Yield: 2.38%
AFLAC Incorporated (NYSE:AFL), through its subsidiaries, provides supplemental health and life insurance products. The company operates through two segments, Aflac Japan and Aflac US. AFLAC Incorporated (NYSE:AFL) was founded in 1955 and is headquartered in Columbus, Georgia.
In the middle of the second quarter of 2021, Goldman Sachs analyst Yaron Kinar raised the price target on AFLAC Incorporated (NYSE:AFL) to $47 from $46 and kept a Sell rating on the shares.
Madison Funds, an investment management firm, published its “Madison Dividend Income Fund” second-quarter 2021 investor letter, in which it mentioned AFLAC Incorporated (NYSE:AFL). Here’s what the firm had to say about the stock:
“This quarter we are highlighting Aflac (AFL) as a relative yield example in the Financial sector. AFL is a leading provider of life and supplemental medical insurance in Japan and the U.S. AFL products offer financial protection against loss of income for policy holders based on qualifying health events. Aflac Japan generates approximately 70% of total revenues, and the company has dominant market share in Japan. In the U.S., AFL provides voluntary insurance for policy holders at businesses with products sold through payroll deduction by its large sales force which sells primarily through face-to-face interactions. We believe AFL’s dominant market position in Japan and its large U.S. sales force create a sustainable competitive advantage for the company.
Our thesis on AFL is that its sales will recover from the impact of the COVID pandemic, and it will return significant amount of capital to shareholders. Sales were negatively impacted in both Japan and the U.S. but appear to be in early stages of recovering. We believe sales will improve further as economies open and new products are introduced in Japan. In the U.S., agents will be able to return to face-to-face interactions as people get vaccinated, something that was restricted last year…” (Click here to see the full text)
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Disclosure: None. 10 Dividend Stocks with Over 20 Years of Dividend Increases is originally published on Insider Monkey.
