In this article, we discuss the 10 dividend stocks with over 5% yield.
Dividend investing is one of the best investment strategies that provide an inflation hedge to investors. Dividend assets diversify income investors’ portfolios by paying regular dividends and capital appreciation in the stock price. Yet, the stability of some dividend stocks was tested during the strike of the COVID-19 pandemic in 2020. Dividend payers such as General Motors Company (NYSE:GM), Delta Air Lines, Inc. (NYSE:DAL), and The Walt Disney Company (NYSE:DIS) had to suspend dividend payments to shareholders. Other companies had cut their payout by as much as 75%. Dividends did not begin to stabilize until the end of 2020 when the economy began to recover.
With the projected growth that comes with an improving global economy, dividend-paying companies are garnering greater attention from investors and market analysts this year. According to a report by analytics and solutions provider IHS Markit, global dividend payouts decreased by 8% in 2020 but improved by 21% in 2021. Total dividend distributions are likely to continue their upward trend in 2022, rising by 6% to $2.09 trillion from $1.97 trillion in 2021, according to IHS Markit. The report also stated that dividends in the United States are anticipated to grow 5.4% in 2022 to $670 billion, led by the technology and healthcare sectors.
Some of the well-known companies that have a long history of paying dividends are Altria Group, Inc. (NYSE:MO), Enterprise Products Partners L.P. (NYSE:EPD), and Rio Tinto Group (NYSE:RIO). As of February 22, these dividend stocks yield more than 5%, and we’ll go over other high-yielding stocks in our list below.
Our Methodology
We searched for stocks with a dividend yield of more than 5% and chose 10 with long-term growth catalysts, strong business fundamentals, and recent positive analyst ratings.
In addition, we included hedge fund sentiment on each high-yielding dividend stock using Insider Monkey’s Q4 2021 data.
Dividend Stocks With Over 5% Yield
10. International Business Machines Corporation (NYSE:IBM)
Dividend yield as of February 27: 5.28%
Number of Hedge Fund Holders: 44
Tech dividend aristocrat International Business Machines Corporation (NYSE:IBM) offers a dividend yield of 5.28%. The New York-based information technology giant has raised its dividend every year for the past 26 years. International Business Machines Corporation reported strong Q4 results where its revenue jumped by 6.5% year over year to $16.7 billion. In the fourth quarter of 2021, the cloud computing firm saw revenue growth across all business segments, including software, consulting, infrastructure, and hybrid cloud.
Boston-based investment firm Arrowstreet Capital is International Business Machines Corporation’s (NYSE:IBM) biggest shareholder as of the end of December 2021. The hedge fund owned 3.29 million shares of International Business Machines Corporation worth $441 million. In Q4 2021, more hedge funds became bullish on the tech dividend aristocrat, bringing the total number of shareholders to 44, up from 41 in Q3.
Here is what St. James Investment Company has to say about International Business Machines Corporation in its Q4 2021 investor letter:
“IBM was not the first company to build computers. The distinction belongs to Sperry-Rand’s subsidiary UNIVAC, which introduced the first commercially successful computers in the early 1950s. In this era, IBM did possess the largest research and development department of the business machines industry and quickly caught up, introducing cost-competitive computers a few years after UNIVAC. By the late 1950s, IBM held the dominant market share in computers. IBM also touted a vastly superior sales organization, which used a sales tactic called “paper machines” (the equivalent of today’s “vaporware”). If a competitor’s product was selling well in a market segment that IBM had yet to penetrate, the company would announce a competing product and start taking orders for the “paper machine” long before it was available.
One cannot overstate how powerful IBM was in the computer industry in the 1950s and 1960s. Every competitor rightly worried that if their product worked too well for too long, it was only a matter of time before an army of IBM salesforce representatives mobilized. In their easily recognizable uniforms of starched white shirts, red ties, and blue suits, IBM marketers marched on their customers and offered a more expensive, but much more defensible, choice. “Nobody gets fired for buying IBM” was a common phrase. Even competitors acknowledged that the company excelled at sales. As a UNIVAC executive once complained, ‘It doesn’t do much good to build a better mousetrap if the other guy selling mousetraps has five times as many salesmen.’” (Click here to see the full text)
9. The Williams Companies, Inc. (NYSE:WMB)
Dividend yield as of February 27: 5.54%
Number of Hedge Fund Holders: 38
Just like Altria Group, Inc. and Enterprise Products Partners L.P., The Williams Companies, Inc. (NYSE:WMB) also offers a dividend yield of over 5%. The Oklahoma-based crude and natural gas midstream company recently increased its quarterly dividend by 3.7% to $0.425 per share in early February. The Williams Companies, Inc. is the largest interstate natural gas supplier in the US, with assets in the deepwater Gulf of Mexico, the Rockies, the Pacific Northwest, and the Eastern Seaboard.
According to Insider Monkey’s Q4 13F data, 38 out of 924 funds had stakes in The Williams Companies, Inc. at the end of December 2021, compared to 40 in the previous quarter. Mason Hawkins’ Southeastern Asset Management is the biggest shareholder of The Williams Companies, Inc., owning 7.24 million shares of the stock worth $189 million.
On February 15, Mizuho analyst Gabriel Moreen kept his Buy rating on The Williams Companies, Inc. ahead of the company’s release of Q4 results. Moreen increased his price target for the stock to $33 from $31. The company’s total revenue in 2021 came in at $10.63 billion, up 38% from a year ago. As of February 22, shares of The Williams Companies, Inc. are up 33% in the past twelve months.
Here is what ClearBridge Investments has to say about The Williams Companies, Inc. in its Q3 2021 investor letter:
“We are meaningfully overweight energy, particularly within North American energy infrastructure. Enbridge and Williams, our two infrastructure holdings, possess crown jewel infrastructure assets. They each deliver meaningful proportions of the overall energy produced and consumed in North America. Their revenues are backed by long-term contracts with high-quality counterparties and have little direct commodity price exposure. Their growth has been driven by the increasing production of North American energy. The advent of unconventional oil and gas production (oil sand and shale) has made North America a low-cost competitor on a global basis. We expect strong North American production to be an enduring feature of global energy supply for decades to come.”
8. Enbridge Inc. (NYSE:ENB)
Dividend yield as of February 27: 6.34%
Number of Hedge Fund Holders: 21
Another high-yielding dividend stock from the energy sector is Enbridge Inc. (NYSE:ENB), a Canadian energy infrastructure company. Enbridge Inc. is a good investment option for income investors looking to diversify their portfolio as the energy company has consistently increased its dividend payout over the last 27 years. The Calgary-based company boasts itself as the third-largest natural gas utility in North America, transporting nearly 20% of the US natural gas consumption.
Enbridge Inc. invested $10 billion in growth projects across its businesses, including the gas transmission and distribution segments, in 2021. Furthermore, the energy infrastructure firm completed its $3 billion acquisition of logistics company Moda Midstream Operating LLC, gaining North America’s largest export terminal in Texas. On February 14, TD Securities analyst Linda Ezergailis increased her price target for Enbridge Inc. to C$59 from C$57, maintaining a Buy rating on the shares. As of the fourth week of February, Enbridge Inc. stock gained 8% in the past six months.
GQG Partners initiated a $380 million stake in Enbridge Inc. in the fourth quarter of 2021, making the hedge fund firm the company’s largest shareholder. Overall, 21 funds of the 924 elite funds tracked by Insider Monkey reported owning stakes in Enbridge Inc. at the end of December 2021.
7. Altria Group, Inc. (NYSE:MO)
Dividend yield as of February 27: 6.99%
Number of Hedge Fund Holders: 39
Altria Group, Inc., one of the biggest tobacco companies in the world, offers a dividend yield of 6.99%. The Virginia-based Marlboro cigarette manufacturer paid $1.7 billion in dividends in the fourth quarter of 2021 and $6.4 billion for the full year. Altria Group, Inc. is known as a dividend aristocrat and dividend king for consistently increasing its dividend over the last 52 years.
At the end of the fourth quarter of 2021, 39 hedge funds in the database of Insider Monkey held stakes worth $1.06 billion in Altria Group, Inc., compared to 45 in the preceding quarter worth $829 million.
Altria Group, Inc. reported $6.3 billion in revenue in the fourth quarter of 2021, bringing its total revenue for the year to $26 billion.
6. Ares Capital Corporation (NASDAQ:ARCC)
Dividend yield as of February 27: 7.72%
Number of Hedge Fund Holders: 15
Ares Capital Corporation (NASDAQ:ARCC), a business development company that invests in middle-market companies in the United States and Canada, is one of the dividend stocks in the financial services sector that yields over 5%. Ares Capital Corporation increased its quarterly dividend by 2.4% in February to $0.42 per share, payable on March 31 to shareholders of record on March 15. The New York-based lender also declared additional dividends totaling $0.12 per share for 2022, to be paid in four consecutive quarterly payments of $0.03 per share per quarter.
On February 10, investment banking firm Raymond James kept its Outperform rating on Ares Capital Corporation and increased its price target for the stock to $23 from $22. Hedge funds were also optimistic about the financial stock. By the end of December 2021, 15 elite funds held a stake in Ares Capital Corporation, up from 12 in the previous quarter.
In addition to Altria Group, Inc. and Enterprise Products Partners L.P., Ares Capital Corporation is a good investment option that offers a dividend yield of more than 5%.
5. Enterprise Products Partners L.P. (NYSE:EPD)
Dividend yield as of February 27: 7.82%
Number of Hedge Fund Holders: 21
Enterprise Products Partners L.P. is another high-yielding dividend stock from the midstream industry. Enterprise Products Partners L.P. provides a $1.86 yearly dividend to its stockholders. The Houston-based company operates approximately 50,000 miles of pipelines, multiple natural gas processing units, and several import and export terminals in the US.
Investors are drawn to Enterprise Products Partners L.P. not only because of its dividends but also because of its strong financial health, as seen by its latest Q4 2021 revenue and earnings. Revenue for the fourth quarter was $11.4 billion, up from $7.04 billion in Q4 2020, and total revenue for 2021 increased by 50% year on year to $40.8 billion. In addition, Enterprise Products Partners L.P. ended 2021 with $6.3 billion of free cash flow, up from $2.7 billion in 2020, owing primarily to the net effect of changes in working capital accounts and a decrease in capital expenditures.
As of the fourth quarter of 2021, 21 hedge funds out of the 924 funds tracked by Insider Monkey held stakes in Enterprise Products Partners L.P.. New York-based investment management firm First Eagle Investment Management is the company’s biggest stakeholder. The firm held shares of Enterprise Products Partners L.P. since the first quarter of 2020 and increased its stake in the energy company by 12% as of the fourth quarter of 2021, bringing its total holdings to 3.14 million shares valued at $69 million.
Here is what ClearBridge Investments has to say about Enterprise Products Partners L.P. in its Q1 2021 investor letter:
“While reducing in health care and consumer staples, we increased our exposure to high-quality names in economically sensitive areas of the market. We added to low-cost, high-quality energy names (including) Enterprise Products Partners LP. We are positive on this company’s strong balance sheets, competitive positions, and exposure to economic recovery.”
4. Lumen Technologies, Inc. (NYSE:LUMN)
Dividend yield as of February 27: 9.91%
Number of Hedge Fund Holders: 39
Lumen Technologies, Inc. (NYSE:LUMN), formerly known as CenturyLink, Inc., is another high-yielding dividend stock from the telecom sector. The company offers a dividend yield of 9.91%. Lumen Technologies, Inc. offers tech and connectivity solutions from IT consulting to cloud connectivity. As of the end of December 2021, the company has approximately 4.5 million broadband subscribers.
At the end of the fourth quarter of 2021, 39 hedge funds in the database of Insider Monkey held stakes worth $1.08 billion in Lumen Technologies, Inc.. Knoll Capital Management held 100,000 shares of Lumen Technologies, Inc. in Q4 2021, making the hedge fund firm the biggest stakeholder of the company.
Here is what Longleaf Partners Small-Cap Fund Commentary has to say about Lumen Technologies, Inc. in its Q4 2021 investor letter:
“Lumen (39%, 4.22%; 3%, 0.38%), the global fiber company, was the top absolute and relative 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 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 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.”
3. Rio Tinto Group (NYSE:RIO)
Dividend yield as of February 27: 10.09%
Number of Hedge Fund Holders: 22
London-based miner Rio Tinto Group offers its shareholders an annual dividend of $7.93 per share. The company also declared a special dividend of $2.47 per share on February 23. In 2021, Rio Tinto Group paid a total dividend of $16.8 billion, a new high for the miner and one of the largest in British corporate history.
Rio Tinto Group announced in December that it had signed a deal to acquire Rincon Mining’s Rincon lithium project in Argentina. The $825 million acquisition gives RIO access to one of the world’s largest undeveloped lithium brine projects. Overall, Rio Tinto Group’s (NYSE:RIO) exploration and evaluation spending in 2021 increased by 16% last year to $726 million, with a boost in activities in Australia, Europe, and Western Africa.
As of the end of December 2021, 22 hedge funds had stakes in Rio Tinto Group, with total holdings amounting to $1.84 billion. While in the previous quarter, only 18 funds held stakes in the mining company. As of the end of February, Rio Tinto Group is up 7.45% in the last month.
2. ZIM Integrated Shipping Services Ltd. (NYSE:ZIM)
Dividend yield as of February 27: 14.27%
Number of Hedge Fund Holders: 43
ZIM Integrated Shipping Services Ltd. (NYSE:ZIM) is an Israeli shipping company with global operations. As of the end of February 2022, the company had returned 248% of gains to investors in the previous year, having gone public in January 2021 with gross proceeds of $217.5 million. Currently, ZIM Integrated Shipping Services Ltd. pays an annual dividend of $10 per share.
ZIM Integrated Shipping Services Ltd. is one of Israel’s largest container shipping companies, with over 100 vessels. In February, ZIM Integrated Shipping Services Ltd. entered into a charter deal with Navios Maritime Partners L.P. (NYSE:PAC). For $870 million, the Israeli shipping company will charter and deploy five secondhand vessels across its global network, as well as eight newbuilds in Asia and Africa from Navios.
Insider Monkey’s data shows that 33 hedge funds held stakes in ZIM Integrated Shipping Services Ltd. at the end of the fourth quarter worth $784 million. At the end of the third quarter, 22 hedge funds held stakes in the company. With over 2.7 million shares of ZIM Integrated Shipping Services Ltd., Marshall Wace LLP holds the largest stake in the shipping company.
In the Q2 2021 investor letter of Evermore Global Advisors, the fund mentioned ZIM Integrated Shipping Services Ltd. and discussed its stance on the firm. Here is what the fund said:
“ZIM Integrated Shipping Services (ZIM) was the largest contributor to the Fund’s performance during the second quarter. With a market cap of $5.2 billion, ZIM is an Israel-based containership operator that had its initial public offering on the New York Stock Exchange this past January. As a reminder, we discussed ZIM at length in the Q1 2021 quarterly commentary as one of the new investments that we initiated during that period.
There were several notable developments during the second quarter. Given the company’s unique asset-light business model and targeted, global niche approach, ZIM continued to generate exceptionally strong cash flows. ZIM ended the period with approximately $1.25 billion in cash and about $915 million in net debt. Due to the strong operational performance, the company further strengthened its balance sheet by redeeming its Series 1 and Series 2 unsecured notes due in 2023. With the early redemption of the unsecured notes, ZIM was no longer subject to certain dividend restrictions, and it declared a special dividend of $2 per share, which will be payable on Sept 15th (goes ex on August 24th). Lastly, management revised its 2021 full-year EBITDA guidance from $1.4 – 1.6 billion to $2.5 – $2.7 billion, which was a sizeable increase compared to the levels set last March. To that end, we continue to have high conviction in our position in ZIM.”
1. Vale S.A. (NYSE:VALE)
Dividend yield as of February 27: 15.17%
Number of Hedge Fund Holders: 25
Mining giant Vale S.A. (NYSE:VALE), the largest iron ore producer in Brazil, pays its shareholders an annual dividend of $2.70 per share and offers a dividend yield of 15.17%. Vale S.A. extracts thermal and metallurgical coal and produces other basic materials such as gold, silver, copper, and precious metals.
On February 9, Exane BNP Paribas analyst Sylvain Brunet upgraded his rating on Vale S.A. to Outperform from Neutral. Brunet set a $20.50 price target for the mineral stock.
Following an incident last year in which 39 miners were trapped in the Canadian mine, the Brazilian miner has recently resumed operations in the Totten mine. Vale S.A. NYSE:VALE) indicated that the Totten mine closure had already been factored into its 2022 nickel production forecast, which ranged from 175,000 to 190,000 tonnes.
At the end of the fourth quarter of 2021, 25 hedge funds in the database of Insider Monkey held stakes worth $1.71 billion in Vale S.A., compared to 27 funds in the previous quarter worth 1.98 billion. Fisher Asset Management holds the biggest stake in Vale S.A. as of the end of December 2021, with over 30.9 million shares worth $434 million.
You can also take a peek at the 9 Stocks to Buy According to Billionaire Andreas Halvorsen’s Viking Global and Warren Buffett’s Latest Portfolio: 10 Dividend Stock Picks.
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This article is originally published at Insider Monkey.
