In this article, we discuss 11 best dividend-paying stocks to buy now. You can skip our detailed analysis of dividend stocks and their returns, and go directly to read 5 Best Dividend Paying Stocks To Buy Now.
Dividend companies are gaining ground among investors this year as they navigate the rocky market. In times of financial instability, investors often look for safe options to generate regular streams of income. Historically, dividend stocks have performed well during periods of high inflation. According to a report by Charles Schwab, companies that grew or initiated their dividends delivered an annual average return of 13.74% from 1981 to 2020, compared with a 9.60% annual average return of non-dividend paying companies.
Steve Greiner, vice president of Schwab Equity Ratings, talked about dividend investments in one of his interviews with Charles Schwab. He said that reinvested dividends can significantly increase returns over time, which makes them one of the safest options available for investors. He further mentioned that companies with regular payouts and strong histories of growing their dividends can keep up better with rising inflation. This stance was supported by Fidelity’s report, which mentioned that since 1930, dividends represented nearly 40% of the total return of the S&P 500. It further entailed that dividends accounted for 54% of the total return of the index during the 1940s, 1970s, and 1980s when inflation averaged 5% or above.
Companies like The Coca-Cola Company (NYSE:KO), PepsiCo, Inc. (NASDAQ:PEP), and Merck & Co., Inc. (NYSE:MRK) are favored by investors as these companies have been raising their dividends regularly. In addition to this, these corporations boast strong balance sheets and stable cash flow generation to support their dividends. Further elaborating on this, we will discuss the best dividend-paying stocks to buy now.
Photo by Sharon McCutcheon on Unsplash
Our Methodology:
For our list, we took 11 of the leading companies in the world that also paid dividends and ranked them based on the number of hedge fund holders in our database that also held shares in the same stock.
11 Best Dividend Paying Stocks To Buy Now
11. Chevron Corporation (NYSE:CVX)
Number of Hedge Fund Holders: 59
Dividend Yield as of September 26: 4.03%
Chevron Corporation (NYSE:CVX), which ranks 11th in our list of the best dividend stocks, is an American multinational energy industry company that is involved in the exploration of oil and natural gas. In Q2 2022, the company reported revenue of $68.7 billion, which showed an 83% growth from the same period last year. The company’s operating cash flow came in at $13.7 billion, up from $8 billion in the previous quarter. Its free cash flow stood at $10.6 billion, compared with $6 billion in the preceding quarter.
On July 27, Chevron Corporation (NYSE:CVX) declared a quarterly dividend of $1.42 per share, in line with its previous dividend. The company has a 35-year run of raising its dividends consistently. As of September 26, the stock’s dividend yield came in at 4.03%.
In September, Piper Sandler raised its price target on Chevron Corporation (NYSE:CVX) to $190 and kept an Overweight rating on the shares, as the firm remained constructive on the integrated oils. The firm also appreciated the company’s strategic priorities.
The number of hedge funds tracked by Insider Monkey owning stakes in Chevron Corporation (NYSE:CVX) grew to 59 in Q2 2022, from 53 in the previous quarter. The collective value of these stakes is over $26 billion. Warren Buffett’s Berkshire Hathaway was the company’s leading stakeholder in Q2.
In addition to The Coca-Cola Company (NYSE:KO), PepsiCo, Inc. (NASDAQ:PEP), and Merck & Co., Inc. (NYSE:MRK), Chevron Corporation (NYSE:CVX) is one of the best dividend-paying stocks to buy now.
Diamond Hill Capital mentioned Chevron Corporation (NYSE:CVX) in its Q1 2022 investor letter. Here is what the firm had to say:
“Other top contributors in Q1 included multinational energy company Chevron Corp. (NYSE:CVX). The company benefited from increased energy demand as COVID-related economic restrictions eased in tandem with concerns regarding supply interruptions related to Russia’s invasion of Ukraine.”
10. Walmart Inc. (NYSE:WMT)
Number of Hedge Fund Holders: 67
Dividend Yield as of September 26: 1.71%
Walmart Inc. (NYSE:WMT) is an American multinational retail corporation that operates a chain of retail stores in the country. The company was a popular buy among elite funds in Q2 2022, as 67 hedge funds tracked by Insider Monkey owned positions in it, up from 60 a quarter earlier. The stakes owned by these hedge funds have a total value of over $3.78 billion.
On September, 26 Walmart Inc. (NYSE:WMT) announced the launch of two new immersive experiences through which the company will be stepping into the metaverse space. These platforms will offer unique interactive content and entertainment for customers. In Q2 2022, Walmart Inc. (NYSE:WMT) reported revenue of $152.6 billion, presenting an 8.2% growth from the same period last year. The company’s US comparable sales grew by 6.5% from the prior-year period.
Walmart Inc. (NYSE:WMT) currently pays a quarterly dividend of $0.56 per share. This was the company’s 49th consecutive year of dividend growth. As of September 26, the stock’s dividend yield stood at 1.71%.
In September, KeyBanc initiated its coverage of Walmart Inc. (NYSE:WMT) with an Overweight rating and a $155 price target. The firm highlighted the company’s defensive growth and margin recovery to normal levels.
9. Eli Lilly and Company (NYSE:LLY)
Number of Hedge Fund Holders: 70
Dividend Yield as of September 26: 1.27%
Eli Lilly and Company (NYSE:LLY), one of the best dividend stocks, is an Indiana-based pharmaceutical company that sells its products in over 125 countries. In Q2 2022, the company reported an operating cash flow of over $820.7 million, and its free cash flow came in at $370 million. The company generated over $6.4 billion in revenues and its operating income was recorded at $1.6 billion. Its dividend has shown a 15% year-over-year growth.
Eli Lilly and Company (NYSE:LLY) has been making uninterrupted dividend payments since 1885 and has been raising its payouts consistently for the past 8 years. It currently pays a quarterly dividend of $0.98 per share and has a yield of 1.27%, as recorded on September 26.
In September, Cantor Fitzgerald raised its price target on Eli Lilly and Company (NYSE:LLY) to $360 and kept an Overweight rating on the shares, mentioning the company’s recent successful data on Alzheimer’s disease.
At the end of June 2022, the number of hedge funds tracked by Insider Monkey owning stakes in Eli Lilly and Company (NYSE:LLY) jumped to 70, from 53 in the previous quarter. These stakes have a consolidated value of over $6.7 billion. With nearly $2 billion worth of stakes, Fisher Asset Management owned the largest position in the company in Q2.
Baron Funds mentioned Eli Lilly and Company (NYSE:LLY) in its Q2 2022 investor letter. Here is what the firm had to say:
“Eli Lilly and Company is a global pharmaceutical company focused on discovering, developing, and selling medicines for patients in the therapeutic areas of diabetes, oncology, immunology, and neuroscience. Stock performance was strong due to positive study results for Eli Lilly’s drug Tirzepatide (subsequently branded Mounjaro), which delivered up to 22.5% weight loss in adults with obesity. We think Tirzepatide is in the early innings of adoption in a large obesity market where penetration of anti-obesity medications is currently low. We continue to think Eli Lilly has a healthy base business with limited near-term patent expirations, a strong pipeline, and potential for significant margin expansion, which should translate to solid revenue and earnings growth over many years.”
8. The Procter & Gamble Company (NYSE:PG)
Number of Hedge Fund Holders: 71
Dividend Yield as of September 26: 2.69%
The Procter & Gamble Company (NYSE:PG) is an Ohio-based multinational manufacturing company that specializes in consumer goods and other personal care products. The company currently pays a quarterly dividend of $0.9133 per share, with a dividend yield of 2.69%, as recorded on September 26. It has been making consistent dividend payments for the past 132 years while maintaining a 66-year track record of dividend growth.
In fiscal Q4 2022, The Procter & Gamble Company (NYSE:PG) reported an operating cash flow of $3.7 billion, compared with $3.2 billion in the previous quarter. Its free cash flow jumped to $3.02 billion, from $2.5 billion in the preceding quarter. In FY22, the company returned nearly $19 billion to shareholders and dividend payments represented $8.8 billion of the shareholder return.
In August, Barclays maintained its Overweight rating on The Procter & Gamble Company (NYSE:PG), following the company’s fiscal Q4 results. The firm also acknowledged the company’s business model in this current market cycle.
Of the 895 hedge funds tracked by Insider Monkey, 71 funds owned stakes in The Procter & Gamble Company (NYSE:PG) in Q2 2022, compared with 72 a quarter earlier. These stakes hold a consolidated value of over $5.5 billion. Ray Dalio’s Bridgewater Associates was the company’s leading stakeholder in Q2.
7. The Home Depot, Inc. (NYSE:HD)
Number of Hedge Fund Holders: 80
Dividend Yield as of September 26: 2.85%
The Home Depot, Inc. (NYSE:HD) is a Georgia-based multinational home improvement company that specializes in the production of tools, construction products, and related appliances. In August, Truist raised its price target on the stock to $399 with a Buy rating on the shares, as the company reported strong business trends in its recent quarterly earnings. The firm remained bullish on the company’s Home Improvement sector.
In Q2 2022, The Home Depot, Inc. (NYSE:HD) topped analysts’ consensus on various accounts. The company posted a GAAP EPS of $5.05 and revenue of $43.8 billion, which beat estimates by $0.11 and $460 million, respectively. The company’s operating cash flow stood at $3.4 billion and its free cash flow came in at $2.6 billion. It paid nearly $4 billion in dividends during the quarter.
The Home Depot, Inc. (NYSE:HD) has been raising its dividends consistently for the past 12 years and has a five-year dividend CAGR of 16.4%. It currently offers $1.90 per share in quarterly dividends with a dividend yield of 2.85%, as of September 26.
As consumers pause new home purchases amid growing recession fears and mortgage rates, they’d spend more on improving their existing homes. This could bode well for Home Depot. Its strong position in the market and solid cash flows make it one of the best dividend stocks to buy.
The Home Depot, Inc. (NYSE:HD) was a popular stock among elite funds in Q2 2022 as some of the biggest Wall Street names owned stakes in the company, including Ken Fisher, Ken Griffin, and Jim Simons. Overall, 80 hedge funds tracked by Insider Monkey owned stakes in the company in Q2, with a total value of over $5.3 billion.
Diamond Hill Capital mentioned The Home Depot, Inc. (NYSE:HD) in its Q1 2022 investor letter. Here is what the firm had to say:
“Home Depot shares underperformed as continued solid fundamental results were outweighed by concerns about the impact rising mortgage rates may have on the housing market and general inflationary pressures potentially leading to a consumer spending slowdown. We view the long-term prospects and multi-year fundamental outlook as unchanged.”
6. Johnson & Johnson (NYSE:JNJ)
Number of Hedge Fund Holders: 80
Dividend Yield as of September 26: 2.73%
Johnson & Johnson (NYSE:JNJ), one of the most prominent companies of Big Pharma, has been raising its dividends regularly for the past 60 years. The company currently pays a quarterly dividend of $1.13 per share, with a dividend yield of 2.73%, as of September 26. Its stellar history makes it one of the best dividend stocks to buy.
Following the company’s Q2 earnings that highlighted the effects of ongoing inflation, UBS maintained its Neutral rating on Johnson & Johnson (NYSE:JNJ) in July, with a $180 price target. The company is one of the best dividend-paying stocks alongside The Coca-Cola Company (NYSE:KO), PepsiCo, Inc. (NASDAQ:PEP), and Merck & Co., Inc. (NYSE:MRK).
As of the close of Q2 2022, 83 hedge funds tracked by Insider Monkey owned stakes in Johnson & Johnson (NYSE:JNJ), the same as in the previous quarter. The total value of these stakes is over $6.7 billion, compared with $7.4 billion worth of stakes owned by hedge funds in the preceding quarter.
Mayar Capital mentioned Johnson & Johnson (NYSE:JNJ) in its Q2 2022 investor letter. Here is what the firm has to say:
“J&J is currently our largest position and a long-standing holding. The majority of the group’s sales comes from its collection of pharmaceutical franchises, but a large majority (~45%) comes from its collection of medical device businesses and its consumer brands.
Here’s how JNJ make and spend a dollar of revenues: As of 2021, about 55 cents of that dollar comes from its pharmaceutical sales – sales of drugs to pharmacies and distributors – while 30 cents come from the sale of medical devices, such as surgery equipment and orthopaedics. The rest of that dollar in sales comes from sales of JNJ’s consumer brands such as Listerine mouthwash, Nicorette nicotine tablets and Neutrogena cosmetics.
To make that dollar, however, JNJ typically spends about 25 cents to make the products themselves and another 27 cents on marketing and general administrative functions. This leaves JNJ with about 48 cents on the dollar in profit…”
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Disclosure. None. 11 Best Dividend Paying Stocks To Buy Now is originally published on Insider Monkey.