In this article, we will analyze the list of the best dividend stocks.
In 2023, dividend stocks underperformed compared to the overall market, which was driven largely by tech stocks. As we move into the latter half of 2024, dividend stocks have shown a similar performance trend in the first half of the year. The Dividend Aristocrats Index, which tracks the performance of companies with at least 25 consecutive years of dividend growth, is down by 0.17% year-to-date, compared with a nearly 18% gain in the broader market. Dividend stocks are declining for two main reasons. First, high interest rates are drawing investors towards bonds instead. Second, the current surge in AI technology is capturing investors’ focus on tech stocks. The tech-heavy NASDAQ has achieved its all-time high this year, surging by over 25% so far in 2024. That said, investors haven’t completely lost faith in dividend stocks. When all is said and done, successful investing is about playing the long game. Dividend stocks have consistently delivered, accounting for 36% of the market’s total return since 1927. Bank of America has also declared 2024 as ‘the year of dividends’.
In dividend investing, dividend growth stocks often take a lead over high-yield dividend stocks. Recent research indicates that companies providing consistent and sustainable dividends, without excessive payouts, have delivered the best long-term returns. Wellington Management conducted a study that categorized dividend-paying companies into five groups based on their payout levels. Since 1930, the research found that stocks with the highest dividend payouts generally performed similarly to those with high, but not the very highest, payouts, although they frequently traded places as the top performers over the decades.
Also read: 10 Very High Yield Dividend Stocks With Upside Potential
The dividend growth strategy has become so prominent over the years that many companies in the US are steadily increasing their payouts. In 2023, dividend payments reached an all-time high and have consistently increased over the years. Analysts are very optimistic about dividend payments for 2024, and recent projections indicate that the companies are on course to meet this new target record. One of the key reasons for this growth is that many companies, especially large technology firms, have abundant cash reserves and are rapidly increasing their free cash flows. This strong financial position enables them to continue rewarding their investors with higher dividend payments. According to the latest report by S&P Dow Jones Indices, companies in the index paid $153.4 billion in dividends in the second quarter of 2024, up from $151.6 billion from the previous quarter and up from $143.2 billion in the same period last year. The report also mentioned that there were 539 reported dividend increases, compared to 460 in the prior-year period, marking a 17.2% year-over-year rise. The total amount of these dividend increases reached $20.4 billion for the quarter, up from $9.8 billion in Q2 2023.
Dividend growth stocks are a hit with investors because they have rock-solid businesses, a steady cash flow, and strong balance sheets. These companies are top-notch for generating passive income. In this article, we will take a look at some of the best dividend stocks to buy.
Speedcurve Performance Analytics
Our Methodology:
To compile this list, we thoroughly reviewed reputable sources such as Forbes, Morningstar, Barron’s, and Business Insider. From their latest articles, we gathered the stocks they collectively favored. Additionally, we assessed the sentiment of hedge funds for each stock using Insider Monkey’s Q1 2024 database. The stocks are arranged in ascending order based on the number of hedge funds that hold stakes in these companies. 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).
15. Lockheed Martin Corporation (NYSE:LMT)
Number of Hedge Fund Holders: 47
Lockheed Martin Corporation (NYSE:LMT) is a Maryland-based aerospace and defense company that specializes in advanced technology systems, services, and products. The company has been catching investors’ eye due to an increasing backlog, enhancements in manufacturing, and rising military expenditures. Its backlog is currently at $159 billion, representing over two years of sales. The backlog includes several National Security Space awards received during the first quarter of 2024, highlighting the extensive range of its portfolio. That said, with the federal government making up 75% of the company’s annual sales, any changes in defense spending can significantly affect the company’s performance. However, we think that the company is well-positioned for growth, thanks to its major programs and advancements in aviation and missile technology.
In the first quarter of 2024, Lockheed Martin Corporation (NYSE:LMT) reported growth in all segments. The Aeronautics business generated the highest revenue among all segments, exceeding $6.8 billion, up from $6.3 billion in the same period last year. Overall, the company’s revenue came in at $17.2 billion, up 14% from the prior-year period. Its success is largely due to its hefty investments in research and development (R&D) and capital projects. Since the beginning of 2024, it has already unveiled a slew of new initiatives. In the most recent quarter, the company invested over $700 million in R&D, which shows that it has strong cash flow generation. It generated $1.6 billion in operating cash flow and $1.3 billion in free cash flow during the quarter.
On June 28, Lockheed Martin Corporation (NYSE:LMT) declared a quarterly dividend of $3.15 per share, which was in line with its previous dividend. It is one of the best stocks for dividends on our list as the company has been growing its payouts for 21 consecutive years. In Q1 2024, it returned $1.8 billion to shareholders through dividends and share repurchases. As of July 15, the stock has a dividend yield of 2.70%.
At the end of Q1 2024, 47 hedge funds tracked by Insider Monkey reported having stakes in Lockheed Martin Corporation (NYSE:LMT), down from 58 in the previous quarter. The collective value of these stakes is nearly $1.4 billion. Among these hedge funds, Two Sigma Advisors was the company’s leading stakeholder in Q1.
14. International Business Machines Corporation (NYSE:IBM)
Number of Hedge Fund Holders: 49
International Business Machines Corporation (NYSE:IBM), or Big Blue, is a New York-based multinational technology company that offers a wide range of related services and products. The company offers a quarterly dividend of $1.67 per share, growing it by 0.6% in April this year. Through this increase, the company stretched its dividend growth streak to 29 years, which makes IBM one of the best stocks for dividends. The stock’s dividend yield on July 15 came in at 3.63%.
With AI being the biggest investment theme in 2024, investors are flocking to companies offering AI-related services and products in any form. Analysts suggest that companies developing AI applications specifically tailored to particular industries and their business needs are likely to be better investments. International Business Machines Corporation (NYSE:IBM) is grabbing all the attention in this context. The company is currently the only provider offering a full technology stack through its Watsonx platform, along with consulting services for implementing and managing generative AI. The stock did not experience strong returns over the past decade, but due to its potential in the AI field, it is delivering strong returns this year. Since the start of 2024, IBM has gained roughly 14% and its 12-month returns came in at over 37%.
In the first quarter of 2024, International Business Machines Corporation (NYSE:IBM) reported revenue of $14.4 billion, which showed a 1.5% growth from the same period last year. The company attributed the growth to the strength of its hybrid cloud and AI strategy. To further strengthen these segments, it has announced the acquisition of HashiCorp, a deal that is currently pending approval. The company is optimistic about AI driving future growth. In Q1 2024, its Watsonx platform and generative AI business have displayed consistent momentum, showing growth every quarter and surpassing $1 billion in revenues since Watsonx launched in mid-2023. For FY24, the company expects revenue to align with its mid-single-digit growth model and anticipates generating approximately $12 billion in free cash flow.
International Business Machines Corporation (NYSE:IBM) was a part of 49 hedge fund portfolios at the end of Q1 2024, compared with 50 in the previous quarter, as per Insider Monkey’s database. The stakes held by these hedge funds have a collective value of over $1 billion.
13. Texas Instruments Incorporated (NASDAQ:TXN)
Number of Hedge Fund Holders: 49
An American multinational semiconductor company, Texas Instruments Incorporated (NASDAQ:TXN) ranks thirteenth on our list of the best stocks for dividends. The semiconductor industry is cyclical, and apart from the high-powered AI chip sector, it has been in a downturn for the past year or more. In addition, the semiconductor inventory decreased somewhat in Q1 2024 but remains at or near 20-year highs for industrial, automotive, consumer, and communication components. Street analysts are of the view that these market conditions will pose a short-term challenge for the company. Over the long term, it is viewed as a solid business that is worth investing in. Since the beginning of 2024, the stock has surged by nearly 20% and gained 10.5% in the past year.
Due to ongoing challenges in the semiconductor industry, Texas Instruments Incorporated (NASDAQ:TXN) reported a 16% YoY decline in revenues at $3.66 billion in the first quarter of 2024. However, it still managed to beat analysts’ expectations by $50 million. The company reported declines in operating operating profits in two of its three segments. The management has indicated that it is strategically investing in manufacturing capacity to tackle these challenges, aiming to establish a strong foundation for future recovery and growth. This commitment is reflected in the company’s notable increase in capital expenditures. Over the past 12 months, the company has invested $3.7 billion in R&D and $5.3 billion in capital expenditures.
These moves did have an impact on Texas Instruments Incorporated (NASDAQ:TXN)’s cash flow generation. In Q1 2024, the company generated $6.3 billion in operating cash flow and its free cash flow for the period came in at $940 million. The free cash flow represented just 5.6% of its revenue. The company also remained committed to its shareholder return, distributing $4.6 billion to investors through dividends, up from $4.3 billion in the prior-year period.
Texas Instruments Incorporated (NASDAQ:TXN)’s cash flow generation and shareholder return make it one of the best stocks for dividends. In addition, the company has been growing its dividends for the past 12 years. It currently offers a quarterly dividend of $1.30 per share and has a dividend yield of 2.56%, as of July 15.
At the end of Q1 2024, 49 hedge funds in Insider Monkey’s database owned stakes in Texas Instruments Incorporated (NASDAQ:TXN), down from 55 in the preceding quarter. These stakes are valued at over $2.4 billion. With more than 4.2 million shares, First Eagle Investment Management was the company’s leading stakeholder in Q1.
12. Automatic Data Processing, Inc. (NASDAQ:ADP)
Number of Hedge Fund Holders: 52
Automatic Data Processing, Inc. (NASDAQ:ADP) is an American management services company that offers payroll processing, tax administration, and human capital management services to its consumers. The company’s strong earnings in fiscal Q3 2024 were attributed to robust new business bookings and high client retention rates. The company’s commitment to delivering innovative products, distinctive service, and exceptional customer experiences has been key to achieving record levels of client satisfaction this fiscal year. With a stable demand environment in human capital management (HCM), the company is now concentrating on executing its strategies in the fourth quarter and aiming to build momentum heading into fiscal 2025.
Automatic Data Processing, Inc. (NASDAQ:ADP) benefits a lot from its business model. The company’s financial success stems from its effective strategic implementation, operational efficiency, and alignment with global employment trends. The company serves essential functions that are crucial to businesses, and its reputation as one of the best and most effective options in the field makes it highly attractive to new customers. Currently, it serves over 1 million clients in 140 countries. This reputation also acts as a deterrent for existing customers considering a switch to a competitor.
Automatic Data Processing, Inc. (NASDAQ:ADP) has held up to its credibility as a strong dividend payer. Not only its strong cash generation but its dividend growth year after year made it a top choice among income investors. In FY23, the company returned approximately $3 billion to shareholders through dividends and share repurchases. In addition, it is just one year away from becoming a Dividend King, having raised its payouts for 49 consecutive years, which makes ADP one of the best stocks for dividends. The company offers a quarterly dividend of $1.40 per share and has a dividend yield of 2.32%, as of July 15.
As of the end of Q1 2024, 52 hedge funds tracked by Insider Monkey reported having stakes in Automatic Data Processing, Inc. (NASDAQ:ADP), compared with 54 in the previous quarter. The consolidated value of these stakes is more than $3.8 billion.
11. American Tower Corporation (NYSE:AMT)
Number of Hedge Fund Holders: 56
American Tower Corporation (NYSE:AMT) is an American real estate investment trust company that deals in wireless and broadcast communications infrastructure in several countries. Earlier this year, the company announced a collaboration with IBM to speed up the implementation of a hybrid, multi-cloud computing platform at the edge. With growing interest in distributed edge computing, IBM and American Tower recognized an opportunity to combine their respective strengths and provide significant customer value on a large scale.
As a real estate investment trust (REIT) company, American Tower Corporation (NYSE:AMT) is facing challenges due to high interest rates, which have contributed to a decline of over 31% from its peak in 2021. In addition, its significant investments in data centers have not yielded the expected results. In the first quarter of 2024, the company reported $450 million in development spending in its Data Centers segment. The stock is down by over 5% year-to-date. However, its recent quarterly earnings are pretty encouraging. The company reported a total revenue of $2.8 billion, with the international market contributing $1.22 billion of that amount. Its FFO of $2.79 per share beat analysts’ estimates by $0.22.
Baron Funds also highlighted reasons to invest in American Tower Corporation (NYSE:AMT) in its Q1 2024 investor letter. Here is what the firm has to say:
“Following a more than 30% rebound in the fourth quarter of 2023, shares of American Tower Corporation (NYSE:AMT) lagged in the first quarter of 2024. The uncertainty around the timing and ultimate financial impact of American Tower’s India business sale, ongoing lower overall spending by wireless carriers, and higher interest rates weighed on the company’s shares. Please refer to our “Top Net Purchases” section for our rationale for acquiring additional shares.
In the first quarter, we continued to acquire additional shares of American Tower Corporation, a global operator of over 200,000 wireless towers. We believe that 2023 marked a trough in earnings growth, financing/interest rate headwinds, and valuation bottoming. Looking ahead, we are more optimistic about the company’s prospects due to its: i) accelerating growth expectations; ii) cash flow stability underpinned by core developed markets; iii) secular demand drivers such as growing mobile data usage, 5G spectrum deployment and network investment, edge computing, and connected homes and cars, which will require increased wireless bandwidth and increased spending by the mobile carriers; and iv) strong growth within CoreSite, its network-dense data center company, and optionality with that business segment as future network needs and architecture evolve.”
Though American Tower Corporation (NYSE:AMT) is in a distinctive position to consistently drive growth across the entire 5G technology lifecycle, its dividend history remains a key attraction for investors. In the most recent quarter, the company’s cash flow remained stable. It generated $1.3 billion in operating cash flow, up 20% from the same period last year. Its free cash flow also showed a whopping 48% YoY growth at $882 million. In the past five years, the company has raised its payouts at an annual average rate of 14%. Overall, it has been growing its dividends for 13 consecutive years, which makes AMT one of the best stocks for dividends. Currently, it offers a quarterly dividend of $1.62 per share for a dividend yield of 3.13%, as reported on July 15.
At the end of March 2024, 56 hedge funds in Insider Monkey’s database owned stakes in American Tower Corporation (NYSE:AMT), the same as in the previous quarter. These stakes are valued at nearly $3 billion in total.
10. PepsiCo, Inc. (NASDAQ:PEP)
Number of Hedge Fund Holders: 62
PepsiCo, Inc. (NASDAQ:PEP) is a New York-based food, snack, and beverage company. The company was included in 62 hedge fund portfolios at the end of Q1 2024, compared with 64 in the previous quarter, according to Insider Monkey’s database. The stakes owned by these hedge funds have a total value of over $4.5 billion.
PepsiCo, Inc. (NASDAQ:PEP) is renowned for its long-standing reliability, having served customers globally for decades. Its stock price has soared by almost 7,000% over its lifetime. Customers have a strong affinity for the company’s products, allowing it to make minor price adjustments without significantly affecting consumer budgets. Over decades, population growth and gradual price increases have steadily increased revenue from $70.3 billion in 2020 to $92 billion by 2023.
PepsiCo, Inc. (NASDAQ:PEP) has successfully increased its revenue through strategic initiatives, particularly benefiting from acquisitions. In 2020, it expanded its presence in the energy drink market by acquiring Rockstar, and in 2022, it entered into a significant collaboration with Celsius, further bolstering its position in this industry. In the second quarter of 2024, the company reported revenue of $22.5 billion, which saw a 0.8% growth from the same period last year. Year-to-date, it generated over $1.3 billion in operating cash flow. For the rest of the year, the company aims to enhance and accelerate its productivity efforts while making strategic and disciplined commercial investments in the market to foster growth.
PepsiCo, Inc. (NASDAQ:PEP), one of the best stocks for dividends, currently offers a quarterly dividend of $1.355 per share. The company has been rewarding shareholders with growing dividends for the past 52 consecutive years. As of July 15, the stock has a dividend yield of 3.29%. In the first six months of the year, it returned $3.5 billion to shareholders through dividends and expects the figure to reach $$7.2 billion in FY24.
9. The Coca-Cola Company (NYSE:KO)
Number of Hedge Fund Holders: 62
Warren Buffett’s favorite The Coca-Cola Company (NYSE:KO) ranks ninth on our list of the best stocks for dividends. The American beverage company is a reliable dividend payer, distributing millions of dollars in dividends to shareholders each quarter. Berkshire Hathaway, its largest investor, received $75 million in cash dividends from KO in 1994. By 2023, this amount has soared to an impressive $736 million, with expectations of receiving $776 million in Coke dividends this year. This growth highlights the powerful compounding effect of the company’s dividends. In 2024 so far, the stock has soared by over 6%.
The Coca-Cola Company (NYSE:KO) has expanded through strategic acquisitions, recognizing the shift in consumer preferences away from sugary sodas. Over the past decade, it has heavily invested in diversifying its product offerings. These efforts helped the company reverse a significant decline in revenue, growing net sales from $33 billion in 2020 to $46 billion in 2023. In the first quarter of 2024, the company reported $11.2 billion in revenue, reflecting a 3% increase from the same period last year.
In addition to growing revenues, The Coca-Cola Company (NYSE:KO) also has a strong cash flow generation. However, with the company’s size comes larger challenges. After accounting for its cash outflows, there isn’t much left for the company to reduce its total debt of $43.7 billion. Additionally, its debt-to-equity ratio of 1.56 is considered somewhat high. In the most recent quarter, the company generated $528 million in operating cash flow and its free cash flow came in at $158 million. It expects a strong cash position for FY24, projecting to distribute $8.4 billion in dividends for the year. This distribution will be supported by an estimated by $9.2 billion in free cash flow.
The Coca-Cola Company (NYSE:KO) has been growing its dividends for 62 years consistently, which makes it one of the best stocks for dividends. The company offers a quarterly dividend of $0.485 per share and has a dividend yield of 3.05%, as of July 15.
Insider Monkey’s database of Q1 2024 indicated that 62 hedge funds owned stakes in The Coca-Cola Company (NYSE:KO), which remained unchanged from the previous quarter. These stakes are worth over $28.5 billion collectively.
