In this article, we will take a look at some of the best stocks with steady dividends.
Dividend stocks, while popular among investors, have been underperforming for a while. Dan Lefkovitz, a strategist at Morningstar Indexes, attributed this lag to a straightforward reason: their limited exposure to the technology sector. Although technology wasn’t the top-performing sector in 2024, it came close and now represents a significant portion of the market.
However, this doesn’t suggest that dividend stocks are fundamentally weak or that they won’t rebound in the future. Alex Bryan, Morningstar’s director of product management for equity indexes, believes that changing market dynamics could benefit dividend investors. Here are some comments from the analyst:
“From a valuation standpoint, dividends look more attractive than they did a year ago, and that’s partially because of the relative underperformance that they’ve had. Bonds are certainly more competitive relative to dividends. But if you look at dividend-paying stocks relative to the rest of the equity markets, I think they’re becoming more attractive relative to other stocks.”
Other analysts also suggested that dividend-paying stocks might stage a comeback in 2025 due to growing investor demand for cash returns. The broader market’s dividend yield fell below 1.19% in 2024, marking a 20-year low, compared to its long-term average of 4.3%. With interest rates recovering on risk-free investments like Treasurys, companies are facing increased competition for yield. As a result, many are raising dividends or initiating them for the first time. Notably, some major tech giants began paying dividends in 2024, signaling to the market their shift toward value positioning within a high-growth sector.
Also read: 10 Best High-Yield Dividend Stocks To Invest In
In 2024, companies in the broader market that paid dividends returned around 35% of their net income and 45% of their free cash flow to shareholders, as reported by Bloomberg. The average dividend yield for these companies was approximately 2.3%, while the market capitalization-weighted yield stood at about 1.5%.
Wolfe Research’s Chief Investment Strategist, Chris Senyek, offers a unique perspective on investing in dividend stocks. While investors typically focus on companies with growing dividends and high yields, Senyek suggested exploring other opportunities. He highlighted companies initiating dividends for the first time and those that have recently reduced their payouts. Initiating a dividend indicates management’s confidence in maintaining steady earnings and cash flow, while also attracting a new group of investors.
Senyek also noted that shares of companies that cut dividends tend to underperform leading up to the cut, perform in line with the market shortly after, and begin to outperform about six months later. The key is to identify companies that may be at risk of cutting dividends and to reconsider those that reduced payouts a few months earlier. To forecast potential cuts, Senyek examines companies with high dividend yields, substantial debt, and elevated payout ratios. For potential new dividend payers, Senyek seeks out companies with robust free cash flow yields that are actively repurchasing shares and maintaining manageable debt levels. In view of this, we will take a look at stocks with steady dividends.
Our Methodology:
For this article, we scanned Insider Monkey’s database of 900 hedge funds as of Q3 2024 and picked dividend stocks with over 10 consecutive years of dividend growth. From this list, we further refined our selection criteria by identifying stocks with a projected upside potential of over 10% based on analyst price targets, as of January 20. The stocks are ranked according to their upside potential. We also considered hedge fund sentiment around each stock using Insider Monkey’s data for Q3 2024.
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. Medtronic plc (NYSE:MDT)
Upside Potential as of January 20: 10.3%
Medtronic plc (NYSE:MDT) is a medical device company that has a diversified business, offering a wide range of devices across four key sectors: medical-surgical, neuroscience, cardiovascular, and diabetes. The company reported strong earnings in its fiscal Q1 2025. Its revenue came in at $8.4 billion, up 5.3% from the same period last year. The company reported $686 million in diabetes revenue for the quarter, reflecting a 12.4% year-over-year growth. This increase was fueled by a double-digit rise in international revenue, attributed to higher adoption rates of continuous glucose monitoring (CGM) devices and the continued rollout of the Simplera Sync sensor.
Since the start of 2025, Medtronic plc (NYSE:MDT) has surged by nearly 10%. Earlier this year, the company secured US approval for its Simplera continuous glucose monitoring (CGM) system. In addition, it entered into a partnership with Abbott Laboratories, a prominent player in the CGM market. Under this collaboration, Abbott will supply a CGM system compatible with Medtronic’s devices, which Medtronic will exclusively distribute. This partnership underscores Medtronic’s commitment to innovation and enhancing its diabetes division.
Matrix Asset Advisors made the following comment about MDT in its Q3 2024 investor letter:
“In Q3, we added to two Healthcare positions, Medtronic plc (NYSE:MDT) and Becton Dickinson (BD). Both companies are very attractive in our valuation analysis. We started the LCV position in MDT in the second quarter and added to it as more cash became available. The company’s business results have improved this year as the number of medical procedures normalized from their decline during the pandemic. “
Medtronic plc (NYSE:MDT) is one of the best stocks with steady dividends as the company has a strong cash position. In the first six months of its fiscal year, the company generated nearly $2 billion in operating cash flow, which grew from $1.5 billion in the prior-year period. Its free cash flow of $1.02 billion also showed a growth from $721 million in the same quarter last year. This cash position allowed the company to raise its payouts for 47 years in a row. Currently, it pays a quarterly dividend of $0.70 per share and has a dividend yield of 3.18%, as of January 20.
The number of hedge funds tracked by Insider Monkey owning stakes in Medtronic plc (NYSE:MDT) grew to 60 in Q3 2024, from 52 in the previous quarter. These stakes are collectively valued at over $4.2 billion.
14. Starbucks Corporation (NASDAQ:SBUX)
Upside Potential as of January 20: 10.48%
Starbucks Corporation (NASDAQ:SBUX) is a Washington-based multinational chain of coffeehouses and roastery reserves that specializes in a wide range of coffee beverages. The stock has gained just a little over 2% in the past 12 months as the company faced difficulties despite the economy and consumer spending demonstrating resilience in uncertain times. The competitive and fragmented nature of the retail coffee market presents considerable obstacles. In the US, the top five coffee chains hold less than half of the market, providing consumers with numerous alternatives. With minimal switching barriers, customers can easily opt for other options, leaving the company with little room for mistakes, which appears to be impacting its performance.
In the first half of the year, Starbucks Corporation (NASDAQ:SBUX) experienced a slowdown in sales, with some decline in performance. Both customers and employees attributed this to operational issues, including an extensive menu and a surge in mobile orders. In addition, the company faced pressure from two activist investors who acquired stakes in Starbucks during the summer. However, in August, Starbucks surprised investors by announcing that Brian Niccol would assume the role of CEO, a move that generated optimism about the company’s future. This leadership change was anticipated to bring positive outcomes, and the company did exhibit some improvements in its most recent quarter.
Starbucks Corporation (NASDAQ:SBUX) reported $9.07 billion in revenues in the fourth quarter of 2024, which fell slightly by 3.2% from the same period last year. However, the company maintained strong cash flow, generating $6 billion in operating cash. The company also broadened its footprint by opening 722 new stores, increasing its total to 40,199 locations. Of these, 52% are company-owned, while 48% operate under licensing agreements.
Starbucks Corporation (NASDAQ:SBUX) is also popular among investors because of its dividend. The company has been raising its payouts for 14 consecutive years, which makes SBUX one of the best stocks with steady dividends. Currently, it pays a quarterly dividend of $0.61 per share and has a dividend yield of 2.56%, as of January 20.
Invesco Distributors, Inc. highlighted Starbucks Corporation (NASDAQ:SBUX) in its Q3 2024 investor letter. Here is what the firm has to say:
“Starbucks Corporation (NASDAQ:SBUX): The coffee retailer has struggled with China’s economic softness, declining sales and weaker US store traffic that have hampered revenues and profit margins. However, we believe the company has several positive, long-term catalysts, including strong growth in store count, better labor relations, improving productivity from labor, technology and innovation, and easier future earnings comparisons. We believed a management change was imminent, and shortly after we purchased the stock, Starbucks named a new CEO, which was seemingly greeted enthusiastically by investors.”
At the end of Q3 2024, 76 hedge funds tracked by Insider Monkey held stakes in Starbucks Corporation (NASDAQ:SBUX), growing from 70 in the previous quarter. These stakes are worth over $3.2 billion in total. With over 11.7 million shares, Fisher Asset Management was the company’s leading stakeholder in Q3.
13. Bristol-Myers Squibb Company (NYSE:BMY)
Upside Potential as of January 20: 10.7%
Bristol-Myers Squibb Company (NYSE:BMY) is a New York-based pharmaceutical industry company. It is facing some challenges, but management is actively addressing them. Efforts are underway to reduce costs, with an aim to cut approximately $1.5 billion in expenses annually by the end of 2025. In addition, the company intends to maintain its focus on research and development (R&D) in oncology, targeting areas that management expects will yield the highest returns on investment, helping to drive growth while managing expenses.
As a result of these initiatives, Bristol-Myers Squibb Company (NYSE:BMY) is gaining favor with analysts. They believe it is well-positioned for growth as it approaches a critical period, with outcomes from 40 clinical trials on the horizon. By 2025, five new products are anticipated to contribute at least half of the company’s revenue, marking the beginning of substantial growth. A notable asset in its pipeline is Cobenfy, a schizophrenia treatment that has already outperformed other branded options in the market, showing significant commercial promise.
In addition to this, Bristol-Myers Squibb Company (NYSE:BMY) is also popular among investors because of its stable dividend policy. The company’s cash position is strong, as it generated $15 billion in operating cash flow in the past 12 months and its levered free cash flow for the period came in at $17.5 billion. Due to this cash flow, the company has never skipped a dividend in the past 93 years and has raised its payouts for 16 consecutive years. It currently offers a quarterly dividend of $0.62 per share and has a dividend yield of 4.33%, as of January 20.
As of the close of Q3 2024, 70 hedge funds in Insider Monkey’s database owned stakes in Bristol-Myers Squibb Company (NYSE:BMY), growing from 61 in the previous quarter. These stakes have a consolidated value of over $3.3 billion.
