In this article, we discuss 12 most profitable dividend stocks to invest in. You can skip our detailed analysis of dividend stocks and their performance in the past, and go directly to read 5 Most Profitable Dividend Stocks To Invest In.
According to numerous analysts, the US has managed to steer clear of a recession up to this point. However, the economic landscape in the country remains uncertain as the Consumer Price Index (CPI), a key measure of inflation, increased by 3.5% in March, exceeding expectations and signaling a surge in inflation. On the other hand, job gains are unexpectedly strong in the US as there was an average monthly increase of 276,000 jobs in the first quarter of 2024, surpassing the previous quarter’s average of 212,000 jobs per month, as reported by Reuters. The report also mentioned that the unemployment rate has remained below 4% for 26 consecutive months, marking the longest period of such low unemployment rates since the late 1960s. The uncertain economic conditions have created opportunities to explore investments in dividend stocks as these equities are known for providing consistent income streams.
The performance of dividend stocks has remained strong in previous inflationary periods. In Our article titled 25 Things Every Dividend Investor Should Know, we cited data from Hartford Funds, which analyzed the returns of dividend stocks in periods of high inflation. The report mentioned that there were eight instances of inflationary periods between 1970 and 2022, during which dividend-paying companies consistently performed better than their non-dividend counterparts. The report particularly highlighted the 1970s as a notable period of high inflation, driven by surging oil prices. Despite market challenges, dividends accounted for as much as 73% of the S&P 500’s total return during this period.
Dividend payments have consistently grown over the years, offering appealing prospects for investors. According to a report by Janus Henderson, global dividend payments achieved their all-time high of $1.66 trillion in 2023 and are projected to rise further to $1.72 trillion in 2024. This growth is primarily attributed to the strong corporate balance sheets. In addition to this, the banking sector stands to benefit from higher interest rates, contributing significantly to dividend growth. Last year, nearly half of the increased dividends originated from banks, as they rewarded shareholders due to a notable surge in profits from lending activities.
In addition to strong dividend payouts, the fluctuating economic conditions had nothing on corporate profits in 2023. According to data from the London Stock Exchange Group, the S&P 500 recorded a growth rate of 7.8% in earnings per share for the fourth quarter of 2023, as of February 2, surpassing the 7.5% growth observed in the entire Q3, and marking the highest growth rate of the year. The report also mentioned that 90% of the energy companies have reported earnings beat in Q4, with profits exceeding expectations by nearly 14%.
JPMorgan Chase & Co. (NYSE:JPM), Exxon Mobil Corporation (NYSE:XOM), and Bank of America Corporation (NYSE:BAC) are some of the most profitable stocks offering dividends to shareholders. In this article, we will further take a look at some other most profitable stocks to buy.
Image by Sergei Tokmakov Terms.Law from Pixabay
Our Methodology:
For this list, we first used a stock screener to identify large-cap dividend stocks with market capitalization above $10 billion. From that list, we picked out dividend stocks offering regular payouts to shareholders and further shortlisted 12 dividend stocks with the highest trailing twelve-month (TTM) net income. The stocks are ranked in ascending order of their latest TTM net income. Data from over 900 elite hedge funds tracked by Insider Monkey in the fourth quarter of 2023 was used to identify the number of hedge funds that hold stakes in each firm. 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). That’s why we pay very close attention to this often-ignored indicator.
12. Broadcom Inc. (NASDAQ:AVGO)
Latest TTM Net Income: $11.5 billion
Broadcom Inc. (NASDAQ:AVGO) is a multinational technology company that specializes in semiconductors and related products. The company currently pays a quarterly dividend of $5.25 per share and has a dividend yield of 1.56%, as of April 27. It has been growing its dividends for the past 13 consecutive years.
Broadcom Inc. (NASDAQ:AVGO) is one of the most profitable stocks on our list as the company reported a strong cash position in the first quarter of 2024. Its operating cash flow for the quarter came in at over $4.8 billion and it generated roughly $4.7 billion in free cash flow (FCF). The FCF represented 39% of the company’s revenue. In addition to this, the company returned $2.4 billion to shareholders through dividends in FY23.
At the end of Q4 2023, 91 hedge funds tracked by Insider Monkey held stakes in Broadcom Inc. (NASDAQ:AVGO), growing from 87 in the previous quarter. The consolidated value of these stakes is over $8.8 billion.
11. AT&T Inc. (NYSE:T)
Latest TTM Net Income: $13.4 billion
An American multinational telecommunications company, AT&T Inc. (NYSE:T) is next on our list of the most profitable stocks to invest in. The company offers a wide range of operations, such as wireless and internet, entertainment, and business solutions. It has been paying regular dividends to shareholders since 1995 and its current quarterly dividend comes in at $0.2775 per share. The stock offers an impressive dividend yield of 6.63%, as of April 27.
AT&T Inc. (NYSE:T) generated over $7.5 billion in operating cash flow in the first quarter of 2024, up $0.9 billion from the same period last year. The company ended the quarter with over $3.5 billion available in cash and cash equivalents.
AT&T Inc. (NYSE:T) was a popular buy among hedge funds at the end of Q4 2023 with 66 funds holding stakes in the company, up from 52 in the previous quarter, as per Insider Monkey’s database. These stakes are worth nearly $4 billion in total.
10. The Procter & Gamble Company (NYSE:PG)
Latest TTM Net Income: $14.8 billion
The Procter & Gamble Company (NYSE:PG) is an Ohio-based consumer goods manufacturing company that offers a wide range of products in various categories. On April 9, the company declared a 7% hike in its quarterly dividend to $1.0065 per share. This marked the company’s 68th consecutive year of dividend growth, with the company achieving one of the longest dividend growth streaks in the market. Moreover, it has never missed a dividend payment since 1890. As of April 27, the stock has a dividend yield of 2.50%.
As of the close of Q4 2023, 71 hedge funds in Insider Monkey’s database owned stakes in The Procter & Gamble Company (NYSE:PG), down from 75 in the previous quarter. These stakes have a total value of roughly $6 billion. Among these hedge funds, Fisher Asset Management was the company’s leading stakeholder in Q4.
9. The Home Depot, Inc. (NYSE:HD)
Latest TTM Net Income: $15.1 billion
The Home Depot, Inc. (NYSE:HD) is a multinational home improvement retail company that offers related tools and services to its consumers. The company has raised its dividends for 14 years straight and has made uninterrupted dividend payments to shareholders. In FY23, it returned over $8.3 billion to shareholders through dividends. The company offers a quarterly dividend of $2.25 per share and has a dividend yield of 2.69%, as of April 27.
According to Insider Monkey’s database of Q4 2023, 70 hedge funds owned stakes in The Home Depot, Inc. (NYSE:HD), compared with 76 in the previous quarter. These stakes are valued at roughly $6 billion.
8. UnitedHealth Group Incorporated (NYSE:UNH)
Latest TTM Net Income: $15.3 billion
UnitedHealth Group Incorporated (NYSE:UNH) is an American multinational health insurance and services company that mainly operates in various segments of the health industry. The company offers a quarterly dividend of $1.88 per share, having raised it by 14% in 2023. Through this increase, the company stretched its dividend growth streak to 13 years. The stock’s dividend yield on April 27 came in at 1.52%. Its TTM net income currently stands at $15.3 billion, which makes it one of the most profitable stocks on our list.
The number of hedge funds tracked by Insider Monkey owning stakes in UnitedHealth Group Incorporated (NYSE:UNH) jumped to 113 in Q4 2023, from 104 in the preceding quarter. These stakes are collectively valued at over $11 billion. With over 3.4 million shares, GQG Partners was the company’s leading stakeholder in Q4.
7. Walmart Inc. (NYSE:WMT)
Latest TTM Net Income: $15.5 billion
Walmart Inc. (NYSE:WMT) is an Arkansas-based multinational retail company that operates a chain of discount stores and hypermarkets. Earlier this year, the company hiked its dividend by 9% after adjusting for stock split, resulting in a new quarterly dividend of $0.2075 per share. This was the company’s 51st consecutive year of dividend growth. The stock’s dividend yield on April 27 came in at 1.38%.
Insider Monkey’s database of Q4 2023 indicated that 85 hedge funds held stakes in Walmart Inc. (NYSE:WMT), up from 80 in the preceding quarter. These stakes have a total value of more than $6.2 billion. With over 28.6 million shares, Fisher Asset Management was the company’s largest stakeholder in Q4.
6. Wells Fargo & Company (NYSE:WFC)
Latest TTM Net Income: $17.5 billion
An American financial services company, Wells Fargo & Company (NYSE:WFC) ranks sixth on our list of the most profitable stocks with over $17 billion in TTM net income. The company’s current quarterly dividend comes in at $0.35 per share for a dividend yield of 2.34%, as of April 27.
Wells Fargo & Company (NYSE:WFC) was a part of 72 hedge fund portfolios at the end of Q4 2023, compared with 77 in the previous quarter, as per Insider Monkey’s database. The stakes held by these hedge funds have a total value of more than $5.5 billion.
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Disclosure. None. 12 Most Profitable Dividend Stocks To Invest In is originally published on Insider Monkey.