In this article, we will take a look at some of the best dividend stocks.
The year 2024 was exceptional for US stocks, with the broader market climbing over 23% and the tech-focused NASDAQ gaining 29%. These impressive results were driven by the “Magnificent 7” group of stocks, which rose nearly 67%, alongside several other large-cap stocks. It marked the second consecutive year of over 20% gains for the broader market, a feat not seen since the late 1990s. Analysts and investors are optimistic about the market’s future, as 2024 demonstrated remarkable strength, suggesting the positive trend could continue. However, despite the current upbeat outlook, investor sentiment could shift quickly due to factors such as global tensions, economic developments, or unforeseen events.
No matter how the market trends, investors tend to gravitate towards safe stocks that offer stability, particularly during challenging times. Among these secure investment choices, dividend stocks are especially favored. These stocks are typically issued by companies with a reliable history of consistent dividend payments, often from well-established sectors such as utilities, consumer goods, or healthcare.
Also Read: 10 Best Dividend Kings Stocks to Invest in Now
Historical analysis consistently shows that dividend stocks tend to outperform other asset classes across various market cycles. A report by T. Rowe Price highlighted that since 1926, dividends have accounted for nearly one-third of the total equity returns for US stocks. From 1980 to 2019, a period marked by a significant decline in interest rates, dividends contributed to 75% of the returns from the broader market. The report further mentioned that dividends become especially valuable in a low-interest-rate environment, offering a steady cash flow when other fixed-income options are less attractive. Once companies start paying dividends, they rarely stop, and most increase their payouts over time. Paying dividends can make a stock more appealing to investors, potentially boosting its value. Over the last decade, dividends for the benchmark index have grown annually, with an average compound growth rate of just over 7%. In strong markets, dividends have enhanced total returns, while in years with low or negative returns, such as 2020 and 2022, dividends played a larger role in total returns, helping to bolster portfolio resilience.
Regarding the safety of dividend stocks, analysts recommend that investors prioritize dividend growth rather than chasing yield traps. Dan Lefkovitz, a strategist with Morningstar’s Index team, stressed the importance of focusing on dividend growth, highlighting that it is a distinct strategy from high-dividend investing. He explained that dividend growth reflects a company’s strong competitive position and positive future prospects. A dividend growth portfolio tends to align more closely with the overall market in terms of sector distribution and growth versus value characteristics, such as price-to-earnings ratios. While it has a value-oriented approach, it is more balanced and core-focused compared to a high-dividend portfolio.
Companies with a history of consistently raising their dividends have typically outperformed those that don’t pay dividends, all while experiencing less volatility. While dividends are not guaranteed and can fluctuate, especially in the current environment, they have played a substantial role in enhancing overall equity returns over the years. In this list, we will take a look at some of the best safe dividend stocks for 2025.
Photo by nick chong on Unsplash
Our Methodology:
For this article, we scanned Insider Monkey’s database of 900 hedge funds as of Q3 2024 to find stocks with sustainable payout ratios popular among hedge funds. Our focus was on companies that consistently distribute dividends to their shareholders. From this initial selection, we narrowed down the list to include only those companies with a 5-year average payout ratio below 60%, indicating a robust cash position. Subsequently, we identified the top 10 companies meeting these criteria and arranged them in ascending order of the number of hedge funds that held stakes in each of 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).
12. Cisco Systems, Inc. (NASDAQ:CSCO)
Number of Hedge Fund Holders: 60
5-Year Average Payout Ratio: 55.3%
Cisco Systems, Inc. (NASDAQ:CSCO) is an American multinational technology company that specializes in networking hardware, software, and telecommunications equipment. The company reported strong earnings in fiscal Q1 2025, with revenues of $13.8 billion. Though the revenue fell by 6% on a YoY basis, it beat analysts’ expectations by $70.5 million. The company’s net income for the quarter came in at $2.7 billion. Its financial standing remained solid, and it also showcased impressive progress in its developments. The company successfully acquired DeepFactor, Inc., a private enterprise focused on cloud-native application security, along with Robust Intelligence, Inc., a private firm offering AI security solutions. In the past 12 months, the stock has surged by over 16%.
In its recent quarterly earnings, Cisco Systems, Inc. (NASDAQ:CSCO) pointed out that its clients are focusing on essential infrastructure investments to advance AI development. The company highlighted that its broad range of offerings gives it a distinct advantage to benefit from this trend. Its revenue, gross margin, and earnings per share all exceeded expectations, landing at the upper end or surpassing the guidance range, which reflects significant operating leverage.
Cisco Systems, Inc. (NASDAQ:CSCO) also demonstrated a strong cash position, which is sufficient to fund its dividend payments. In the most recent quarter, the company generated an operating cash flow of $3.7 billion, up 54% from the same period last year. The company ended the quarter with $18.7 billion available in cash and cash equivalents. Moreover, it also paid $1.6 billion to shareholders through dividends. The company pays a quarterly dividend of $0.40 per share and has a dividend yield of 2.72%, as of January 13. It is one of the best dividend stocks on our list as the company maintains a 17-year streak of consistent dividend growth.
At the end of Q3 2024, 60 hedge funds tracked by Insider Monkey owned stakes in Cisco Systems, Inc. (NASDAQ:CSCO), compared with 61 in the previous quarter. These stakes are worth over $3 billion in total. Among these hedge funds, Arrowstreet Capital was the company’s leading stakeholder in Q3.
11. Lowe’s Companies, Inc. (NYSE:LOW)
Number of Hedge Fund Holders: 60
5-Year Average Payout Ratio: 32.6%
Lowe’s Companies, Inc. (NYSE:LOW) is an American home improvement retailer that offers a wide range of related products and services including hardware, tools, appliances, building materials, paint, plumbing supplies, and garden equipment. Despite the company facing challenges from weaker consumer demand, investors are encouraged to look at the bigger picture within the industry. Analysts note that in 2022, the median age of homes in the US reached 40 years, a notable increase from 31 years in 2005. In addition, the country has been experiencing a significant housing inventory shortage, estimated at between 4 million and 7 million homes. These trends are advantageous for Lowe’s, as they motivate homeowners to invest in improving their existing properties rather than purchasing new ones. In the past 12 months, the stock has surged by nearly 13%.
In the third quarter of 2024, Lowe’s Companies, Inc. (NYSE:LOW) reported revenue of $20.17 billion, which fell by 2% from the same period last year. Despite this, earnings slightly exceeded expectations, even without considering storm-related activities. The positive results were driven by increased Pro sales, robust online performance, and a rise in smaller outdoor DIY projects.
This was also highlighted by Madison Investments in its Q3 2024 investor letter:
“In the third quarter, the top five individual contributors to performance relative to the benchmark were Parker-Hannifin Corporation, Fiserv, Lowe’s Companies, Inc. (NYSE:LOW), Brookfield Corporation, and Progressive Corporation. Despite operating in very different sectors, Lowe’s Companies and Brookfield Corporation are both expected to benefit from the economic activity spurred on by declining interest rates. The Federal Reserve’s decision to lower interest rates sparked investor enthusiasm for both companies during the quarter, even as their sales and profits continue to moderate. For Lowe’s, sales remained weak in the latest quarter as most measures of the housing market remain sluggish. However, if interest rates come down and mortgages become more affordable, activity should return to the housing market which will boost Lowe’s business.”
Lowe’s Companies, Inc. (NYSE:LOW)’s five-year average payout ratio comes in at just 32.6%, which makes it one of the best safe dividend stocks to buy. This low payout ratio has enabled the company to raise its payouts for 59 years in a row. The company currently offers a quarterly dividend of $1.15 per share and has a dividend yield of 1.85%, as of January 13.
As of the end of Q3 2024, 60 hedge funds tracked by Insider Monkey held stakes in Lowe’s Companies, Inc. (NYSE:LOW), down from 62 in the previous quarter. These stakes have a consolidated value of over $2.2 billion. With over 1.6 million shares, Arrowstreet Capital was the company’s leading stakeholder in Q3.
10. American Express Company (NYSE:AXP)
Number of Hedge Fund Holders: 62
5-Year Average Payout Ratio: 24.01%
With a five-year average payout ratio of over 24%, American Express Company (NYSE:AXP) ranks tenth on our list of the best dividend stocks. The American bank holding company specializes in a wide range of related services and products. Its earnings came in strong in the third quarter of 2024. It reported revenue of $16.6 billion, up 8% from the same period last year. This marked the company’s 10th consecutive quarter of record revenue. In addition, it experienced a 6% rise in overall Card Member spending, with card fee revenue growing by 18%. It successfully added 3.3 million new premium Card Members, all while maintaining high retention rates, strong credit performance, and disciplined cost management. Reflecting on its robust performance and solid earnings from its core operations, the company increased its full-year EPS guidance to $13.75 – $14.05, up from the earlier estimate of $13.30 – $13.80. The projected full-year revenue growth remains consistent with the initial guidance, around 9%.
Analysts believe that American Express Company (NYSE:AXP) is a solid company due to its economic moat, which consists of enduring competitive advantages that have solidified its industry position and protected it from rivals. A key component of this moat is its brand, which is viewed as premium. This strong reputation attracts high-income customers who can afford to spend more than the average consumer. By targeting this demographic, the company can impose high annual fees on its premium credit cards. Despite these fees, the number of active cards has grown steadily, rising from 111.1 million in Q3 2014 to 145.5 million in the latest quarter. Moreover, the company has experienced a 13% year-over-year increase in average fees per card in Q3.
American Express Company (NYSE:AXP) was highlighted by GreensKeeper Asset Management in its Q3 2024 investor letter:
“American Express Company (NYSE:AXP) was our second-largest contributor this quarter, with a return of +17.1%. AXP continues to invest in its customers beyond traditional credit card rewards, recently enhancing its Global Dining Access to provide Platinum cardholders with exclusive reservations at premier restaurants worldwide. This focus on unique experiences has attracted a younger demographic, with millennials and Gen Z driving most of the customer acquisition and card spending growth in recent quarters. Exclusive events are more challenging to replicate than standard point reward systems, presenting a challenge for competing card issuers that lack AXP’s scale and concentrated base of affluent consumers. AXP has fine-tuned its offerings over decades to strengthen its network effect and shows no signs of slowing down.”
On December 13, 2024, American Express Company (NYSE:AXP) declared a quarterly dividend of $0.70 per share, which was in line with its previous dividend. The company has always remained committed to its shareholder obligation, paying $15 million to investors in dividends in the most recent quarter. The stock’s dividend yield on January 13 came in at 0.94%.
American Express Company (NYSE:AXP) was included in 62 hedge fund portfolios at the end of Q3 2024, compared with 68 in the previous quarter, according to Insider Monkey’s database. The collective value of these stakes is more than $45 billion. Warren Buffett’s Berkshire Hathaway was the company’s leading stakeholder in Q3.
9. The Cigna Group (NYSE:CI)
Number of Hedge Fund Holders: 66
5-Year Average Payout Ratio: 18.86%
The Cigna Group (NYSE:CI) is an American multinational healthcare and insurance company. Over the past year, the stock has fallen by almost 8%, impacted by a turbulent insurance sector facing unexpected medical costs, heightened regulatory oversight, and rising investor doubt. CDC data indicated that the percentage of Americans without health insurance has climbed to over 8% this year, following record lows during the pandemic. That said, the company’s recent quarterly earnings demonstrate its strong position in the sector.
In the third quarter of 2024, The Cigna Group (NYSE:CI) reported revenue of $63.7 billion, which showed a 30% growth from the same period last year. The company’s total customer relationships rose by 12% compared to December 31, 2023, reaching 183.5 million. During the same period, total pharmacy customers grew by 22% to 120.0 million, driven by new sales and the ongoing expansion of existing relationships.
The Cigna Group (NYSE:CI), one of the best dividend stocks, has been growing its dividends for four consecutive years. The company’s five-year average payout ratio comes in at nearly 19%. It currently pays a quarterly dividend of $1.40 per share and has a dividend yield of 1.98%, as of January 13.
Of the 900 hedge funds tracked by Insider Monkey at the end of Q3 2024, 66 funds held stakes in The Cigna Group (NYSE:CI), the same as in the previous quarter. These stakes have a total value of nearly $4.6 billion. With over 3.2 million shares, GQG Partners was the company’s leading stakeholder in Q3.
8. Costco Wholesale Corporation (NASDAQ:COST)
Number of Hedge Fund Holders: 75
5-Year Average Payout Ratio: 27.3%
Costco Wholesale Corporation (NASDAQ:COST) is an American retail company that offers a wide range of related products to its consumers. The company’s retail approach secures a strong and self-reinforcing competitive edge. By offering membership-based pricing and discounts on bulk items, the company is attracting a growing number of loyal shoppers worldwide. This could be seen from its latest quarterly earnings. Moreover, the stock has surged by nearly 36% in the past 12 months.
In fiscal Q1 2025, Costco Wholesale Corporation (NASDAQ:COST) reported revenue of $62 billion, which saw a 7.5% growth from the same period last year. The company’s net income for the quarter also jumped to $1.8 billion, from $1.6 billion in the prior-year period. Its cash position was also stable as it ended the quarter with nearly $11 billion available in cash and cash equivalents, up from $9.9 billion in the previous quarter. The company also generated $3.3 billion in operating cash flow.
Madison Investments made the following comment about Costco Wholesale Corporation (NASDAQ:COST) in its Q3 2024 investor letter:
“Costco Wholesale Corporation (NASDAQ:COST) continues to demonstrate its commitment to sustainability by lowering its emissions. For example, it has converted its Kirkland Signature laundry packs from plastic tubs to a pouch. This has reduced plastic packaging by 80%. It has also moved to localize production of bulky items such as water, paper, and laundry detergents. Manufacturing these goods closer to the countries in which they are sold reduces emissions associated with shipping.”
Costco Wholesale Corporation (NASDAQ:COST) offers a quarterly dividend of $1.16 per share and has a dividend yield of 0.50%, as of January 13. It is one of the best dividend stocks on our list as the company has been growing its payouts for 20 consecutive years.
The number of hedge funds tracked by Insider Monkey owning investments in Costco Wholesale Corporation (NASDAQ:COST) grew to 75 in Q3 2024, from 71 in the previous quarter. The overall value of these stakes is more than $5.4 billion.
7. The Sherwin-Williams Company (NYSE:SHW)
Number of Hedge Fund Holders: 78
5-Year Average Payout Ratio: 28%
The Sherwin-Williams Company (NYSE:SHW) is an American paint and coating manufacturing company, based in Ohio. The company specializes in the manufacturing and production of related products. It is a strong dividend payer, having raised its payouts for 45 consecutive years. The company’s quarterly dividend comes in at $0.715 per share and has a dividend yield of 0.85%, as of January 13.
In the third quarter of 2024, The Sherwin-Williams Company (NYSE:SHW) posted mixed earnings, with revenues reaching $6.16 billion, a modest year-over-year increase of 0.75%. Sales in the Consumer Brands Group declined due to continued weakness in the North American DIY market. However, the Paint Stores Group saw growth, fueled by a high single-digit rise in protective and marine product sales. Investments in residential repainting helped maintain mid-single-digit growth, despite the tough market conditions.
The Sherwin-Williams Company (NYSE:SHW) is up by 12% in the past 12 months. Its growth was also highlighted by Parnassus Investments in its Q3 2024 investor letter:
“The Sherwin-Williams Company (NYSE:SHW) gained on optimism that lower interest rates would spur a resurgence in home renovations, leading to higher sales of its paint products. The company also hosted an investor day where it gave medium-term financial targets that were well received by investors.”
As a consistent dividend grower, The Sherwin-Williams Company (NYSE:SHW) holds a strong cash position. In the first nine months of the year, the company generated an operating cash flow of $2.22 billion and returned $1.97 billion to shareholders through dividends.
Insider Monkey’s database of Q3 2024 showed that 78 hedge funds held stakes in The Sherwin-Williams Company (NYSE:SHW), up from 76 in the previous quarter. These stakes are worth over $4.63 billion in total. Among these hedge funds, Viking Global was the company’s leading stakeholder in Q3.
6. Union Pacific Corporation (NYSE:UNP)
Number of Hedge Fund Holders: 78
5-Year Average Payout Ratio: 46.6%
Union Pacific Corporation (NYSE:UNP) is a Nebraska-based transport company that operates railroads, connecting 23 states. In the third quarter of 2024, the company posted revenue of $6.01 billion, which shows a 1% increase from the same quarter the previous year. Freight revenue, excluding fuel surcharges, rose by 5%, driven by a 6% increase in revenue carloads. The company’s operating income grew by 11%, reaching $2.4 billion.
Railroads offer a highly efficient method for transporting goods over land, with Union Pacific Corporation (NYSE:UNP) being pivotal in the movement of various bulk commodities. This diverse revenue base helps stabilize its income, though the company’s performance remains tied to economic cycles. When the economy thrives, demand for products such as agricultural goods, industrial materials, and energy rises, boosting the need for the company’s services. Conversely, during economic downturns, demand for these goods declines. Despite these cyclical changes, railroads generally sustain strong operating margins regardless of the economic environment.
In addition to strong financial results, Union Pacific Corporation (NYSE:UNP) also demonstrated a strong cash position. For the first nine months of the year, it reported an operating cash flow of $6.7 billion, up from $5.9 billion in the same period last year. Free cash flow saw a notable increase, climbing to $1.8 billion from $955 million the previous year. The company has a long history of rewarding shareholders, having paid uninterrupted dividends for 125 years and growing its payouts for 18 consecutive years, which makes it one of the best dividend stocks on our list. It currently pays a quarterly dividend of $1.34 per share and has a dividend yield of 2.36%, as of January 13.
As per Insider Monkey’s database of Q3 2024, 78 hedge funds owned stakes in Union Pacific Corporation (NYSE:UNP), compared with 82 in the previous quarter. These stakes are collectively valued at over $4.4 billion.
5. Citigroup Inc. (NYSE:C)
Number of Hedge Fund Holders: 88
5-Year Average Payout Ratio: 34.7%
Citigroup Inc. (NYSE:C) is an American multinational investment bank and financial services company. The bank is undergoing structural changes under the leadership of CEO Jane Fraser, who is working to transform the sprawling institution into a more streamlined and profitable enterprise. Fraser’s strategy involves cutting less profitable operations and focusing on areas that enhance efficiency and profitability. Her initial plan included reducing expensive ventures and optimizing the bank’s expense and capital structures. Upon assuming her role, Fraser announced that Citigroup would exit or close down 13 global consumer franchises, including its highly profitable business in Mexico. In the past 12 months, the stock has surged by over 41%.
In the third quarter of 2024, Citigroup Inc. (NYSE:C) reported $20.3 billion in revenue, marking a 1% increase from the previous year. The Markets segment experienced growth, with Equities revenues rising by 32%. Investment Banking revenue increased by 31%, largely due to investment-grade debt issuance. The recent adjustments in the Wealth business are yielding positive results, with a 9% growth in revenue, driven by substantial gains in client investment assets and investment fee income. US Personal Banking revenues rose by 3%, with Branded Cards seeing an 8% boost, supported by new account acquisitions, higher spending, and improved payment rates, which contributed to the growth in interest-earning balances.
Citigroup Inc. (NYSE:C) is one of the best dividend stocks as the company has been making regular dividend payments for the past 34 years. The company increased its quarterly dividend by 5.7% in June after successfully passing the Federal Reserve’s annual stress test. Moreover, it paid $2.1 billion to investors through dividends and share repurchases in the most recent quarter. Currently, it pays a quarterly dividend of $0.56 per share and has a dividend yield of 3.06%, as of January 13.
As of Insider Monkey’s database of Q3 2024, 88 hedge funds, up from 85 in the previous quarter, owned stakes in Citigroup Inc. (NYSE:C). The consolidated value of these stakes is roughly $11 billion.
4. Thermo Fisher Scientific Inc. (NYSE:TMO)
Number of Hedge Fund Holders: 98
5-Year Average Payout Ratio: 7.26%
Thermo Fisher Scientific Inc. (NYSE:TMO) is an American multinational biotech and life sciences company. It is regarded as one of the most high-quality and impressive compounders in the healthcare and pharmaceutical sectors. It provides investors a unique opportunity to benefit from industry growth without the risks tied to patent expirations or the necessity for groundbreaking new drugs. The company’s business is highly diversified, with more than 80% of its revenue coming from recurring sources, making it a stable and lower-risk investment.
Thermo Fisher Scientific Inc. (NYSE:TMO)’s strong market position is supported by long-term customer relationships, leadership in life sciences, and high switching costs, especially in drug development, where its equipment and consumables are crucial. This solid footing allows the company to achieve consistent growth, with management forecasting high-single-digit revenue growth and mid-teens EPS growth in the coming years. In the third quarter of 2024, the company reported revenue of $10.6 billion, up 0.3% from the same period last year.
Thermo Fisher Scientific Inc. (NYSE:TMO)’s cash position also came in strong. The company generated over $2.1 billion in operating cash flow and its free cash flow came in at $1.9 billion. It is one of the best dividend stocks with seven consecutive years of dividend growth under its belt. It currently pays a quarterly dividend of $0.39 per share and has a dividend yield of 0.28%, as of January 13.
Of the 900 hedge funds tracked by Insider Monkey at the end of Q3 2024, 98 funds held stakes in Thermo Fisher Scientific Inc. (NYSE:TMO), compared with 108 in the previous quarter. These stakes have a total value of over $8.33 billion.
3. UnitedHealth Group Incorporated (NYSE:UNH)
Number of Hedge Fund Holders: 112
5-Year Average Payout Ratio: 33.15%
UnitedHealth Group Incorporated (NYSE:UNH) is a Minnesota-based health insurance company. It boasts a solid dividend track record. It began distributing annual dividends in 1990 and transitioned to quarterly payments in 2010. Since that shift, the company has consistently increased its dividend each year, earning it a spot as one of the best dividend stocks on our list. Its quarterly dividend comes in at $2.10 per share for a dividend yield of 1.55%, as of January 13.
UnitedHealth Group Incorporated (NYSE:UNH) has surged by over 4% in the past 12 months. In the third quarter of 2024, the company delivered strong earnings, with revenue reaching $100.8 billion, a 9.16% increase compared to the same period last year. Its domestic commercial services saw significant growth, gaining 2.4 million new customers this year. For the full year 2024, net earnings are projected to be between $15.50 and $15.75 per share, taking into account the sale of its South American operations earlier in the year and the impact of the Change Healthcare cyberattack.
PGIM Jennison Health Sciences Fund highlighted UNH in its Q3 2024 investor letter. Here is what the firm has to say:
“UnitedHealth Group Incorporated (NYSE:UNH) is the largest health care services company in the U.S. The company offers healthcare benefits to Americans who receive insurance from employers or government-based programs such as Medicare and Medicaid. Half of the company is represented from non-benefits businesses under the Optum umbrella. This includes a technology business that helps hospitals, pharma companies, and other payors. It also includes a fast-growing provider business where Optum owns surgery centers and urgent care centers. The company’s primary care business continues to grow and it’s participating in the emerging trend of primary care taking on risk and acting like an insurance company. Finally, UnitedHealth owns a drug benefits manager. The company continues to have high quality and well-positioned businesses. In the first half of ’24, UnitedHealth has beat earnings expectations and confirmed full year financial guidance. While medical costs have pressured results, the company has cut a lot of spending to support earnings. We have also seen volatility in the stock related to political dynamics; a view that Republicans are better for this group helped support the stock in June and July and a moderation in policy views from the democratic nominee also helped support the stock. Future catalysts for the company and the stock include potentially stabilizing cost trend, a calmer political environment, and visibility into the company’s long-term earnings growth targets.”
According to Insider Monkey’s database of Q3 2024, 112 hedge funds owned stakes in UnitedHealth Group Incorporated (NYSE:UNH), compared with 114 in the preceding quarter. These stakes are valued at over $15 billion in total.
2. Mastercard Incorporated (NYSE:MA)
Number of Hedge Fund Holders: 131
5-Year Average Payout Ratio: 20.20%
Mastercard Incorporated (NYSE:MA) is a New York-based credit card company that offers a wide range of payment processing and related services to its consumers. The company’s third-quarter earnings grabbed investors’ attention. It reported $7.37 billion in revenue, reflecting a 13% increase from the same period the previous year. This growth was driven by robust consumer spending and continued demand for the company’s value-added services and solutions. Mastercard’s cash position remained strong, ending the quarter with over $11 billion in cash and cash equivalents, up from $8.6 billion at the end of December 2023. Moreover, the company’s operating cash flow reached nearly $10 billion, an increase from $7.8 billion in the same period last year.
In addition, Mastercard Incorporated (NYSE:MA) is up by over 18% in the past 12 months. The company has garnered investor confidence with its robust growth, substantial competitive edge, and ability to withstand economic challenges. The company mainly generates revenue through swipe fees, averaging slightly over 2% per transaction processed from co-branded cards. This simple yet dependable business model performs well in prosperous times and shields the company from credit risks during economic slowdowns.
Mastercard Incorporated (NYSE:MA) declared a 15% increase in its quarterly dividend on December 17. This marked the company’s 13th consecutive year of dividend growth, which makes MA one of the best dividend stocks on our list. It now pays a quarterly dividend of $0.76 per share and has a dividend yield of 0.60%, as of January 13.
Montaka Global Investments made the following comment about MA in its Q3 2024 investor letter:
“Montaka owns several duopolists in the financial services industry, including Visa and Mastercard Incorporated (NYSE:MA) in payments; and S&P Global in credit ratings and financial data services. These businesses have competitively protected and reliably growing core businesses. But they also have newer, high-probability adjacent opportunities. The market, however, is underappreciating this powerful combination, in our view.
For Visa and Mastercard, their core businesses in global payment processing are being complemented by significant growth in two areas: New processing opportunities in peer-to-peer, business-to-business, business-to-consumer, and government-to-consumer payments; and Value-added services, including risk, fraud-detection, issuance, acceptance, and open banking.”
As per Insider Monkey’s database of Q3 2024, 131 hedge funds owned investments in Mastercard Incorporated (NYSE:MA), compared with 142 in the previous quarter. The stakes owned by these hedge funds have a total value of more than $17 billion.
1. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 158
5-Year Average Payout Ratio: 17.4%
An American multinational tech giant, Apple Inc. (NASDAQ:AAPL) tops our list of the best dividend stocks. The company has firmly established itself as one of the world’s leading consumer brands and a pioneer in technology innovation. Known for its high-quality products, the company’s premium lineup—including the flagship iPhone, Mac computers, and a growing range of wearables and accessories—has earned widespread acclaim and strong customer loyalty. The stock has surged by over 28% in the past 12 months.
In the fourth quarter of 2024, Apple Inc. (NASDAQ:AAPL) reported revenue of $94.9 billion, which saw a 6% growth from the same period last year. The Products revenue came in at nearly $70 billion, up from $67 billion in the prior-year period. With over 2.2 billion active Apple devices globally, Apple Intelligence is poised to bring AI capabilities to a vast audience through a user-friendly interface. The company is expected to gain from heightened interest in new technology, sparking a refresh cycle, as well as from a stable macroeconomic environment.
Apple Inc. (NASDAQ:AAPL) also reported a strong cash position in the most recent quarter. The company’s operating cash flow came in at $27 billion and it returned $29 billion to shareholders in dividends and share repurchases. It pays a quarterly dividend of $0.25 per share and has a dividend yield of 0.42%, as recorded on January 13.
Parnassus Investments mentioned AAPL in its Q3 2024 investor letter:
“Apple Inc. (NASDAQ:AAPL) shares rose during the quarter, making our underweight position a relative detractor. Investors reacted positively to the new iPhone 16 lineup and its advanced features, including generative artificial intelligence, greater durability and increased processing power.”
Apple Inc. (NASDAQ:AAPL) was included in 158 hedge fund portfolios at the end of Q3 2024, according to Insider Monkey’s database. The stakes held by these funds are worth nearly $110 billion.
Overall, Apple Inc. (NASDAQ:AAPL) ranks first on our list of the best dividend stocks. While we acknowledge the potential for AAPL to grow, 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 AAPL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
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