In this article, we discuss the 5 best income stocks to invest in. If you want to read our comprehensive analysis of these stocks and the current market situation, go directly to 15 Best Income Stocks To Invest In.
5. Devon Energy Corporation (NYSE:DVN)
Number of Hedge Fund Holders: 51
Dividend Yield (as of May 7): 5.80%
Devon Energy Corporation (NYSE:DVN) announced its financial results for the first fiscal quarter of 2022 on May 5, posting an EPS of $1.88, crossing market estimates by $0.12. Revenue for the quarter increased 116.35% on a year-over-year basis to $3.81 billion, surpassing predictions by $242.30 million.
Devon Energy Corporation (NYSE:DVN)’s dividend yield on May 7 came in at 5.80%. On May 2, Devon Energy Corporation (NYSE:DVN) declared a $1.27 per share quarterly dividend, surpassing the previous. The dividend will be paid to shareholders on June 30.
Truist analyst Neal Dingmann raised his price target on Devon Energy Corporation (NYSE:DVN) to $100 from $91 and kept a Buy rating on the shares. Based on the analyst’s notes, the company will continue its multi-pronged shareholder return program of leading with dividends along with “meaningful buybacks” that are expected to rise. He also adds that the company’s current position of about 4,000 low-risk/high-return locations along with about 2,500 incremental operated locations could lead to material upside.
A top dividend stock among investors and one of the best income stocks to invest in, 51 hedge funds were long Devon Energy Corporation (NYSE:DVN) in the fourth quarter of 2021, up from 48 funds in the preceding quarter. The total stakes held in Q4 amounted to $1.74 billion, compared to $1.40 billion in the last quarter. Rajiv Jain’s GQG Partners is the company’s biggest shareholder, with a position worth roughly $639 million.
Here is what GoodHaven Capital Management has to say about Devon Energy Corporation (NYSE:DVN) in their Q4 2020 investor letter:
“After a rough start to the year our two biggest energy holdings – WPX Energy rebounded materially in the last six months though energy was still our biggest detractor for the year. I’ve previously written about deciding earlier this year to direct new capital towards better businesses versus adding more to the energy sector, but given the material optionality at WPX, we opted to maintain a material exposure. Recently WPX announced an all stock merger with a larger competitor – Devon Energy – which will leave the new company with plenty of cash flow at lower oil prices, less leverage, and material upside to higher commodity prices.”
4. Kinder Morgan, Inc. (NYSE:KMI)
Number of Hedge Fund Holders: 39
Dividend Yield (as of May 7): 5.97%
Kinder Morgan, Inc. (NYSE:KMI) is one of the largest energy infrastructure companies in North America. Founded in 1936 and headquartered in Houston, Texas, the company specializes in owning and controlling oil and gas pipelines and terminals. The company’s 85,000 miles of pipelines serve major consuming domestic markets and transport approximately 40% of the natural gas consumed in the United States.
Kinder Morgan, Inc. (NYSE:KMI) declared a $0.2775 per share quarterly dividend on April 20, a 2.8% increase from its prior dividend of $0.27. The dividend is payable on May 16, to shareholders of the company as of May 2. The company’s dividend yield on May 7 came in at 5.97%.
On April 20, Kinder Morgan, Inc. (NYSE:KMI) announced its financial results for the first fiscal quarter of 2022, posting an EPS of $0.32, beating Street estimates by $0.04. The $4.29 billion revenue surpassed market consensus forecasts by $546.32 million.
Earlier this April, Wells Fargo analyst Michael Blum upgraded Kinder Morgan, Inc. (NYSE:KMI) to Equal Weight from Underweight with a price target of $21, up from $19, to reflect higher assumed multiples for refined products assets in his sum-of-the-parts valuation. With inflation rising, the analyst believes Kinder Morgan, Inc. (NYSE:KMI) could benefit from a number of tailwinds, including higher products pipeline growth, higher CO2 segment earnings, strong demand for natural gas, and potential LNG liquefaction projects.
According to the fourth quarter database of Insider Monkey, 39 hedge funds held long positions in Kinder Morgan, Inc. (NYSE:KMI), with collective stakes worth about $999 million. Bob Peck and Andy Raab’s FPR Partners is the leading shareholder of the company, with 17.8 million shares worth $282.7 million.
3. ONEOK, Inc. (NYSE:OKE)
Number of Hedge Fund Holders: 25
Dividend Yield (as of May 7): 6.06%
ONEOK, Inc. (NYSE:OKE) is an American diversified corporation focused primarily on the natural gas industry. Based in Oklahoma, the company is engaged in processing, storing, and transporting natural gas in the United States. The gas company delivers a dividend yield of 6.06% as of May 7. ONEOK, Inc. (NYSE:OKE) on April 21 declared a $0.935 per share quarterly dividend, in line with previous. The dividend is payable on May 16.
Morgan Stanley analyst Robert Kad raised his price target on ONEOK, Inc. (NYSE:OKE) to $81 from $70 and kept an Equal Weight rating on the shares of the company. He remains bullish on the outlook for the midstream sector over the balance of 2022 and generally expects strong Q1 prints and constructive management outlooks given the favorable commodity backdrop.
According to Insider Monkey’s Q4 database, 25 hedge funds were long ONEOK, Inc. (NYSE:OKE), up from 18 funds in the prior quarter. The total stakes owned in the fourth quarter of 2021 amounted to $94.5 million. Phill Gross and Robert Atchinson’s Adage Capital Management is the largest shareholder of the company, with 475,200 shares worth roughly $28 million.
Miller Howard Investments, in its Q3 2021 investor letter, mentioned ONEOK, Inc. (NYSE:OKE) and discussed its stance on the firm. Here is what the fund said:
“In late August, we increased the portfolio’s cyclical exposure by trimming utilities after a period of relative outperformance and reallocating the capital to midstream energy, which had pulled back over the summer. We added ONEOK Inc. (OKE) with the expectation that it will benefit from increasing natural gas and natural gas liquids (NGL) recovery in the Bakken region.”
2. Altria Group, Inc. (NYSE:MO)
Number of Hedge Fund Holders: 39
Dividend Yield (as of May 7): 6.51%
A Virginia-based corporation and a worldwide distributor, Altria Group, Inc. (NYSE:MO) is one of the world’s largest producers and marketers of tobacco, cigarettes, and related products. One of the highest yielding S&P 500 dividend stocks, the tobacco company is a dividend king with a history of 52 years of consecutive dividend growth.
Altria Group, Inc. (NYSE:MO) declared a $0.90 per share quarterly dividend on February 25, in line with the previous. The dividend was payable on April 29, for shareholders of record on March 25. As of May 7, the company has a dividend yield of 6.51%.
On April 28, Altria Group, Inc. (NYSE:MO) reported earnings for the first quarter of 2022. The company announced an EPS of $1.12, beating analysts’ predictions by $0.03. Furthermore, the revenue for the quarter came in at $4.82 billion. Following the company’s Q1 results, Deutsche Bank analyst Steve Powers raised the price target on Altria Group, Inc. (NYSE:MO) to $60 from $54 and kept a Buy rating on the shares on April 29.
A total of 39 hedge funds were long Altria Group, Inc. (NYSE:MO) in Q4 2021, compared to 45 funds in the previous quarter. Rajiv Jain’s GQG Partners owned the leading stake in the company, with more than 9 million shares worth approximately $435 million.
Here is what Broyhill Asset Management has to say about Altria Group, Inc. (NYSE:MO) in its Q2 2021 investor letter:
“Altria (MO) shook off the prospects of a ban on menthol and a potential cap on nicotine and gained 20%. We shared our thoughts on these regulations during the quarter, which are available here.
MO Valuation. MO is up ~ 18% YTD (even accounting for the recent sell-off). We expect MO to generate close to $5 in annual FCF per share over the next few years, putting the stock at ~ 10x, which is less than half the market’s multiple today. Over the last decade, shares have traded at an average multiple of 15x and within a range of ~ 10x – 20x (+/-1 standard deviation). The stock yields 7.2% at the current price, close to a 6% premium to treasuries. Historically, shares have traded closer to a 3% premium to the 10Y, which would imply a ~ $75 share price.”
1. Lumen Technologies, Inc. (NYSE:LUMN)
Number of Hedge Fund Holders: 39
Dividend Yield (as of May 7): 8.97%
Lumen Technologies, Inc. (NYSE:LUMN) is an American technology and communications company, offering integrated solutions and services under the Lumen, Quantum Fiber, and CenturyLink brands. As of May 7, the company has a dividend yield of 8.97%.
On February 24, Lumen Technologies, Inc. (NYSE:LUMN) declared a quarterly dividend of $0.25 per share, which was distributed to shareholders of the company on March 18.
Lumen Technologies, Inc. (NYSE:LUMN) posted its Q1 results on May 4, reporting earnings per share of $0.59, which beat market estimates by $0.14. The company also reported a revenue of $4.68 billion for the quarter.
The investor sentiment for the stock has largely been positive, making Lumen Technologies (NYSE:LUMN) a notable income stock. According to Insider Monkey’s fourth quarter database, 39 funds reported owning stakes in Lumen Technologies, Inc. (NYSE:LUMN), up from 25 funds in the previous quarter. Fred Knoll’s Knoll Capital Management reported owning 100,000 shares of the company in Q4, worth $1.25 million.
Here is what Longleaf Partners Global Fund has to say about Lumen Technologies, Inc. (NYSE:LUMN) in its Q4 2021 investor letter:
“In a year that saw various times when the stock market acted like the pre-COVID, during-COVID, and post-COVID “environments” (not necessarily in that order), the good news was that our two largest holdings – which we feel can thrive in all three of these environments – Lumen and EXOR, were among our top contributors for the year. We believe that both remain underappreciated by the market and offer significant upside from today’s discounted prices.
Lumen (40%, 3.06%; 3%, 0.31%), the global fiber company, was the top contributor for the year. CEO Jeff Storey took two actions this year to substantially increase the business’s value and address the stock’s enormous discount (it trades below 35% of our appraisal value). First, during the third quarter, Lumen sold its Latin American fiber for a good price [9x earnings before interest, taxes, and depreciation (EBITDA)] and the weaker half of its US consumer business for an encouraging 5.5x EBITDA. Both multiples came in above our appraisals and demonstrate how cheap the consolidated Lumen RemainCo is today at less than 6x P/FCF and EV/EBITDA. The majority of Lumen’s remaining EBITDA comes from its US Enterprise and Small and Medium Business (SMB) segments, which grow faster than Lumen’s disposed LatAm fiber and are worth higher multiples. The weakest segment of the new Lumen, the western half of Consumer, is superior to the assets the company just sold for 5.5x EBITDA. Second, Storey quickly repurchased 7% of Lumen’s shares, adding meaningfully to value per share and free cash flow per share. When the dispositions close, proceeds will reduce debt meaningfully, putting net debt right at the company’s leverage ratio target even though that target was based on the prior, inferior business mix. We are pleased that our engagement since filing an amended 13D helped the company begin to deliver positive corporate actions. The market has fixated on the potential for another dividend cut, but Lumen’s FCF is more than sufficient to cover the $1/share payout while investing aggressively into high-return, edge-out capex to grow revenues.”
You can also take a look at 15 Best Technology Stocks To Buy Now and 12 Safe Stocks To Buy For Beginner Investors.
