In this article, we discuss 12 best quality dividend stocks to invest in. You can skip our detailed analysis of quality dividend companies and their performance over the years, and go directly to read 5 Best Quality Dividend Stocks To Invest In.
In a volatile stock market, income-generating stocks hold a significant position. While tech stocks seemed to take the spotlight last year, it doesn’t necessarily indicate the downfall of dividend stocks, which have long held their allure. As we progress through 2024, the stock and bond market outlook fluctuates regularly, influenced by economic updates, statements from the Federal Reserve, and shifts in interest rate expectations. Initially, investors anticipated multiple interest rate cuts by the Federal Reserve throughout the year, with expectations of the first cut in March. However, following a series of positive economic indicators, the Fed has hinted that a rate cut in March is improbable. Consequently, investors are adjusting their valuations of stocks and bonds, awaiting fewer rate cuts to commence later than previously projected. During uncertain times, it’s recommended for investors to focus on dividend stocks. These stocks typically offer good value and can provide consistent income, especially in sectors where there’s potential for growth in stock prices.
Analysts’ preference for dividend stocks isn’t a recent trend; it’s largely based on the historical performance of these stocks. Companies that have consistently increased their dividends over time have proven to be reliable investments, delivering strong returns in the past. These stocks have been particularly resilient during periods of high inflation. For instance, the S&P 500 High Dividend Growth Index, which tracks companies in the S&P 500 known for consistent or increasing dividends and high forecast dividend yield growth, saw its dividends grow at an annual rate of 13.8% from 2010 to 2022, as reported by S&P Dow Jones Indices. This growth rate has surpassed the long-term U.S. inflation rate, even amidst recent spikes in inflation over the past few years. The report also noted that historical data comparing the performance of the S&P 500 High Dividend Growth Index to the S&P 500 indicated that the index has displayed somewhat defensive traits, with a downside capture ratio of 94.5%. Additionally, over time, the index has typically captured 96% of the market’s returns during upward market trends.
As previously mentioned, dividend stocks took a backseat during the tech surge in 2023, but reliable dividend-paying companies are poised for a strong resurgence. Analysts express optimism that investors will acknowledge the strength of these stocks this year. According to strategists at Lord Abbett, a subset of stocks they view as high quality is dividend-growth stocks—companies with a track record of consistently raising their dividends over time. With the economic cycle showing signs of slowing down, they believe companies with solid balance sheets, robust cash flows, and dependable dividends will be well-prepared to maintain their performance.
Walmart Inc. (NYSE:WMT), Johnson & Johnson (NYSE:JNJ), and AbbVie Inc. (NYSE:ABBV) are some of the best dividend stocks with decades-long dividend growth streaks under their belt. In this article, we will further take a look at some quality dividend stocks.
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Our Methodology:
For this list, we scanned Insider Monkey’s database of 910 hedge funds as of Q3 2023 and identified blue-chip dividend companies with strong balance sheets. From this initial selection, we refined our choices to include only those companies that have continuously raised their dividend payouts for 25 years or more and currently offer yields above 3% as of February 13. Our goal in highlighting these companies is to underscore their excellence and longstanding dedication to providing returns to shareholders. The stocks are ranked in ascending order of hedge funds having stakes in them. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here).
12. Realty Income Corporation (NYSE:O)
Number of Hedge Fund Holders: 23
Dividend Yield as of February 13: 5.98%
Realty Income Corporation (NYSE:O) is an American real estate investment trust company that primarily invests in commercial properties. Specifically, it focuses on retail and commercial real estate, leasing its properties to tenants under long-term lease agreements. It is one of the best quality dividend stocks on our list as the company pays monthly dividends to shareholders. Moreover, the company has been raising its dividends for the past 104 consecutive quarters. It currently pays a monthly dividend of $0.2565 per share and has a dividend yield of 5.98%, as of February 13.
At the end of Q3 2023, 23 hedge funds in Insider Monkey’s database reported having stakes in Realty Income Corporation (NYSE:O), compared with 24 in the previous quarter. The collective value of these stakes is nearly $150 million.
11. Consolidated Edison, Inc. (NYSE:ED)
Number of Hedge Fund Holders: 27
Dividend Yield as of February 13: 3.80%
Consolidated Edison, Inc. (NYSE:ED) is a diversified energy company primarily operating in the regulated electric, gas, and steam utility sectors. The company is responsible for supplying electricity and gas to millions of customers in its service territory, maintaining the infrastructure necessary for the reliable delivery of these services, and responding to customer needs.
On January 18, Consolidated Edison, Inc. (NYSE:ED) declared a quarterly dividend of $0.83 per share, up from its previous dividend of $0.81 per share. Through this increase, the company stretched its dividend growth streak to 50 consecutive years, which makes ED one of the best quality dividend stocks to invest in. The stock’s dividend yield on February 13 came in at 3.80%.
As of the close of Q3 2023, 27 hedge funds in Insider Monkey’s database owned stakes in Consolidated Edison, Inc. (NYSE:ED), down from 30 in the previous quarter. These stakes are collectively worth over $350.3 million. With roughly 1 million shares, AQR Capital Management was the company’s leading stakeholder in Q3.
10. Air Products and Chemicals, Inc. (NYSE:APD)
Number of Hedge Fund Holders: 43
Dividend Yield as of February 13: 3.22%
Air Products and Chemicals, Inc. (NYSE:APD) is a global industrial gases company that supplies atmospheric gases, process and specialty gases, performance materials, equipment, and technology. On January 25, the company announced a 1.1% hike in its quarterly dividend to $1.77 per share. This marked the company’s 42nd consecutive annual dividend increase. With a dividend yield of 3.22% as of February 13, APD is one of the best quality dividend stocks to invest in.
At the end of September 2023, 43 hedge funds tracked by Insider Monkey held stakes in Air Products and Chemicals, Inc. (NYSE:APD), the same as in the preceding quarter. The total value of these stakes is over $952.3 million.
9. International Business Machines Corporation (NYSE:IBM)
Number of Hedge Fund Holders: 53
Dividend Yield as of February 13: 3.62%
With a dividend growth streak of 28 consecutive years, International Business Machines Corporation (NYSE:IBM) is next on our list of the best quality dividend stocks to invest in. The multinational tech company currently offers a quarterly dividend of $1.66 per share and has a dividend yield of 3.62%, as of February 13.
The number of hedge funds in Insider Monkey’s database owning stakes in International Business Machines Corporation (NYSE:IBM) grew to 53 in Q3 2023, from 51 in the previous quarter. These stakes have a collective value of roughly $843 million. Among these hedge funds, Marshall Wace LLP was the company’s leading stakeholder in Q3.
8. 3M Company (NYSE:MMM)
Number of Hedge Fund Holders: 54
Dividend Yield as of February 13: 6.53%
3M Company (NYSE:MMM) is a Minnesota-based multinational conglomerate corporation that operates in various industries and is known for its diverse range of products. Recently, the company declared its 66th consecutive annual dividend hike, which makes MMM one of the best quality dividend stocks to invest in. Currently, it offers a quarterly dividend of $1.51 per share and has a dividend yield of 6.53%, as of February 13.
3M Company (NYSE:MMM) ended the third quarter of 2023 with 54 hedge fund positions, up from 49 in the previous quarter, as per Insider Monkey’s database. The stakes owned by these hedge funds have a collective value of more than $818.6 million.
7. The Coca-Cola Company (NYSE:KO)
Number of Hedge Fund Holders: 57
Dividend Yield as of February 13: 3.08%
The Coca-Cola Company (NYSE:KO) is an American beverage company that is involved in the production, marketing, and distribution of non-alcoholic beverages. The company holds a 61-year track record of consistent dividend growth and pays a quarterly dividend of $0.61 per share. The stock’s dividend yield on February 13 came in at 3.08%.
The Coca-Cola Company (NYSE:KO) was a part of 57 hedge fund portfolios at the end of Q3 2023, down from 61 in the previous quarter, according to Insider Monkey’s database. The stakes held by these hedge funds have a consolidated value of more than $25 billion. Warren Buffett’s Berkshire Hathaway owned the largest stake in the company worth over $22.3 billion.
6. NextEra Energy, Inc. (NYSE:NEE)
Number of Hedge Fund Holders: 58
Dividend Yield as of February 13: 3.36%
NextEra Energy, Inc. (NYSE:NEE) ranks sixth on our list of the best quality dividend stocks to invest in. The renewable energy company has raised its payouts for 27 consecutive years and offers a quarterly dividend of $0.4675 per share. As of February 13, the stock has a dividend yield of 3.36%.
According to Insider Monkey’s database of Q3 2023, 58 hedge funds owned stakes in NextEra Energy, Inc. (NYSE:NEE), down slightly from 59 in the preceding quarter. The collective value of these stakes is over $1.4 billion.
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Disclosure. None. 12 Best Quality Dividend Stocks To Invest In is originally published on Insider Monkey.