In this article, we discuss 10 quality stocks with dividend yields over 2%.
With rising inflation, investors are getting increasingly concerned about the possibility of a recession. This year has been a bumpy ride for investors due to consistent hikes in interest rates and other geopolitical tensions. On September 23rd, Dow Jones Industrial Average (DJIA) closed at its lowest level this year, falling 1.62%. Similarly, the S&P 500 and the tech-heavy NASDAQ dropped 1.72% and 1.8% on the same day, respectively. This marked the fifth negative week of the major US indexes in the last six weeks as nearly 91% of the stocks in the S&P 500 reported losses.
Amid the market turmoil, some ETFs have seen more demand. In the first half of 2022, dividend ETFs experienced nearly $50 billion in inflows, reaching their record high, as reported by CNBC.
Many stocks with strong dividend growth histories are favored by investors because of their ability to produce regular income for them. Some stocks that are popular in this regard include The Coca-Cola Company (NYSE:KO), PepsiCo, Inc. (NASDAQ:PEP), and The Procter & Gamble Company. In this article, we will discuss some quality stocks with dividend yields over 2%.
With the Federal Reserve continuing to raise interest rates, the markets could continue to decline if economic data doesn’t meet expectations. Dividend stocks could also be less attractive with higher yields. Nevertheless, there could be an opportunity to buy high quality companies for long term investors given the lower valuations. As always, it’s important to diversify.
Our Methodology:
For our list, we defined quality stocks as any stocks listed in the iShares MSCI USA Quality Factor ETF.
With those quality stocks, we took 10 that had dividend yields of over 2% as of September 22 and we ranked them based on the number of hedge funds in our database that held shares in the same stock at the end of Q2 2022.
10 Quality Stocks With Dividend Yields Over 2%
10. Erie Indemnity Company (NASDAQ:ERIE)
Number of Hedge Fund Holders: 20
Dividend Yield as of September 22: 2.02%
Erie Indemnity Company (NASDAQ:ERIE) is an American insurance company that mainly writes property and casualty insurance. Recently, the company announced the establishment of its venture capital to support innovation in the sector. The venture fund will cater to the personal and commercial insurance value chain.
In Q2 2022, Erie Indemnity Company reported revenue of $726 million, which presented a 6.8% growth from the same period last year. Its operating cash flow for the quarter stood at $82.7 million, compared with $23.5 million in the previous quarter. The company’s free cash flow also jumped to $70.1 million, from $8 million in Q1 2022.
Erie Indemnity Company has a strong dividend history as the company has raised its dividend consistently for the past 31 years. Currently, it pays a quarterly dividend of $1.11 per share, with a dividend yield of 2.02%, as recorded on September 22.
The number of hedge funds tracked by Insider Monkey owning stakes in Erie Indemnity Company stood at 20 in Q2 2022, growing from 18 in the previous quarter. The collective value of these stakes is over $63.1 million. Among these hedge funds, Citadel Investment Group owned the largest position in the company in Q2.
Alongside Lockheed Martin Corporation (NYSE:LMT), QUALCOMM Incorporated (NASDAQ:QCOM), and Johnson & Johnson, Erie Indemnity Company is a quality stock with a dividend yield of over 2% as of September 22 that’s held by many hedge funds in our database at the end of Q2 2022.
9. Duke Realty Corporation (NYSE:DRE)
Number of Hedge Fund Holders: 25
Dividend Yield as of September 22: 2.18%
Duke Realty Corporation (NYSE:DRE) is a real estate investment trust company, headquartered in Indiana, US. The company specializes in the management of warehouse and distribution facilities. In July, Baird maintained its Neutral rating on the stock with a $74 price target. The firm expressed concerns about the company’s performance amid recession fears.
In Q2 2022, Duke Realty Corporation reported an operating cash flow of over $185.7 million, compared with $142.3 million in the previous quarter. The company’s revenue for the quarter stood at $285 million, which showed a 5% growth from the same period last year. Its cash position remained strong as it had over $44 million in cash and cash equivalents and roughly $11 billion in total assets.
On September 1, Duke Realty Corporation declared a quarterly dividend of $0.28 per share, in line with its previous dividend. The company maintains a 7-year streak of dividend growth, with a five-year dividend CAGR of 8.06%. As of September 22, the stock has a dividend yield of 2.18%.
Duke Realty Corporation was a popular buy among elite funds in Q2 2022, as major hedge funds owned stakes in the company including Ken Griffin and Israel Englander. Overall, 25 funds in Insider Monkey’s database held investments in the REIT in Q2, worth $452.7 million.
Baron Funds mentioned Duke Realty Corporation in its Q2 2022 investor letter. Here is what the firm has to say:
“Shares of Duke Realty Corporation, a $25 billion industrial REIT, declined only 7% in the second quarter, in large part because the company agreed to merge with Prologis at a 30% premium. We acquired additional shares in the company in the most recent quarter. We are optimistic about the prospects for the combined Prologis/Duke Realty entity. Prologis is merging with its largest REIT competitor in Duke Realty. Duke’s industrial portfolio is among the best in industrial real estate. The company has an excellent track record in development and construction. We believe the merger has strategic and financial merits including acquiring a high-quality portfolio in mostly similar or attractive real estate markets and the likelihood of realizing both additional revenue and cost savings. We will have more to say on Prologis/Duke Realty in future shareholder letters.
8. Fastenal Company (NASDAQ:FAST)
Number of Hedge Fund Holders: 33
Dividend Yield as of September 22: 2.61%
Fastenal Company (NASDAQ:FAST) is a Minnesota-based industrial supplies company that also distributes construction products. The company started paying annual dividends in 1991 and shifted to quarterly dividends in 2011. It has been making uninterrupted dividend payments since then. The company currently pays a quarterly dividend of $0.31 per share, with a dividend yield of 2.61%, as of September 22.
In Q2 2022, Fastenal Company reported an operating cash flow of over $151 million, which represented 52.7% of the company’s net earnings for the quarter. Its free cash flow came in at $103.7 million. The company generated $1.78 billion in revenue, up 18% from the same period last year. In addition to this, it returned $227.8 million to shareholders in dividends and share repurchases.
In July, Argus reiterated its Buy rating on Fastenal Company with a $55 price target after the company’s solid quarterly earnings. The firm also mentioned that the company’s business trends are also positive as it has shown a double-digit dividend increase earlier this year.
At the end of Q2 2022, 33 hedge funds tracked by Insider Monkey owned stakes in Fastenal Company, growing from 29 in the previous quarter. The collective value of these stakes is roughly $894 million. With over 8.1 million shares, Select Equity Group was the company’s leading stakeholder in Q2.
Nomadic Value Partners mentioned Fastenal Company in its Q2 2021 investor letter. Here is what the firm has to say:
“In mid-June we completely sold out of Fastenal (FAST). Although we had been using FAST as a source of liquidity for a few months already, it still feels bad to say an official goodbye to such an amazing company. However, we must stay focused on the math and the math concludes a difficult task to get our return hurdle going forward. The last time FAST traded at a forward P/E ratio of 34x (the multiple at our exit), the year was 2012. The company had been growing at 20% per year, and the US was about to embark on a shale oil boom, sustaining a low-teens growth trajectory. Today, FAST’s sales growth could turn anemic as the surge for COVID safety products is waning and heavy construction and resources customers are slow to return. An investor must have an optimistic view towards 5+ years of strong real GDP growth as well as sustained inflation. If one lowers the growth assumption to a more likely outcome, then the implicit bet is that low to negative real interest rates will persist and the forward P/E multiple will stay elevated4. I do not want to make such a strong macro bet as the justification for owning a stock. Fastenal is a cyclical business with a growth model proven to take market share secularly, but the time to buy FAST (the stock) will be when we are in the depths of an industrial recession. Stay tuned.”
7. Quest Diagnostics Incorporated (NYSE:DGX)
Number of Hedge Fund Holders: 35
Dividend Yield as of September 22: 2.15%
Quest Diagnostics Incorporated (NYSE:DGX) is an American medical laboratories company that maintains agreements with various hospitals and clinics across the globe. In August, Morgan Stanley assumed its coverage on the stock with an Equal Weight rating and a $142 price target. The firm mentioned the company’s business growth in Q2, driven by strength in Covid PCR volumes.
In Q2 2022, Quest Diagnostics Incorporated reported a base business revenue of $2.10 billion, up 2.9% from the same period last year. The company’s operating cash flow amounted to $402 million and its free cash flow came in at $326 million. At the end of June, it had $790 million available in cash and cash equivalents, with total assets worth $13.3 billion.
Quest Diagnostics Incorporated has a 10-year run of raising its dividends consistently. Its current quarterly dividend stands at $0.66 per share, with a dividend yield of 2.15%, as of September 22.
As of the close of Q2 2022, 35 hedge funds tracked by Insider Monkey owned stakes in Quest Diagnostics Incorporated, down from 37 in the previous quarter. The collective value of these stakes is roughly $523 million.
Davis Funds mentioned Quest Diagnostics Incorporated in its Q4 2021 investor letter. Here is what the firm has to say:
“Healthcare is included in the portfolio both for company-specific reasons, as well as big picture trends. At the company level, we hold select companies in pharmaceuticals, healthcare services and health insurance at attractive valuations. This is at a time when the average age of the U.S. population is fast approaching 40, older than Asia-Pacific and a little younger than the aged populations of Europe and Japan. The number of seniors in the U.S.—i.e., 65 years or older— now surpasses 54 million, or about 15% of the population. Seniors, on average, take a much greater number of medications and account for a large and disproportionate share of healthcare spending, and we expect that trend to continue due to both raw demographics and a proliferation in the number of available treatments and services available now, the latter being driven by innovation and investment in the healthcare industry. Representative holdings in the Fund include Cigna, United Health Group, Viatris and Quest Diagnostics.”
6. Robert Half International Inc. (NYSE:RHI)
Number of Hedge Fund Holders: 36
Dividend Yield as of September 22: 2.35%
Robert Half International Inc. (NYSE:RHI) is a California-based management consulting company that connects employers and job seekers for various positions in different sectors. The company’s cash position remained strong in Q2 2022 as recruitment firms are gaining strength after the pandemic. It generated $233 million in operating cash flow, growing from $69 million in the previous quarter. The company’s free cash flow also jumped to $212.6 million, from $54 million a quarter earlier. Its revenue for the quarter showed a 17.7% year-over-year growth at $1.86 billion.
Robert Half International Inc. has raised its dividends consistently for the past 16 years and has grown its dividends at a CAGR of 11.5% since 2004. It currently pays a quarterly dividend of $0.43 per share, with a dividend yield of 2.35%, as of September 22.
In July, BMO Capital raised its price target on Robert Half International Inc. to $85 with a Market Perform rating on the shares, appreciating the company’s management resources and full-time engagement professionals.
At the end of June 2022, 36 hedge funds tracked by Insider Monkey reported owning stakes in Robert Half International Inc., compared with 37 in the previous quarter. These stakes hold a consolidated value of over $381.7 million. Renaissance Technologies was one of the company’s most prominent stakeholders in Q2.
Like Robert Half International Inc., Lockheed Martin Corporation, QUALCOMM Incorporated, and Johnson & Johnson are quality stocks with dividend yields over 2% that are widely held by hedge funds in our database as of Q2 2022.
5. Tyson Foods, Inc. (NYSE:TSN)
Number of Hedge Fund Holders: 37
Dividend Yield as of September 22: 2.59%
Tyson Foods, Inc. (NYSE:TSN) is an American multinational corporation that operates in the food industry. It is one of the largest processors of chicken, beef, and pork globally. In August, Stephens maintained its Overweight rating on the stock with a $95 price target, following the company’s recent quarterly earnings. The firm highlighted the clear momentum in the company’s chicken business and its improving earnings into the next fiscal year.
In fiscal Q3 2022, Tyson Foods, Inc. reported revenue of $13.5 billion, up 8.2% from the same period last year. The company’s operating cash flow stood at $666 million and it generated $190 million in free cash flow. It ended the quarter with over $1 billion in cash and cash equivalents and over $9.3 billion in total current assets.
Tyson Foods, Inc. has been raising its dividends consistently for the past 10 years and has a five-year dividend CAGR of 15.38%. The company currently pays a quarterly dividend of $0.46 per share and has a yield of 2.59%, as of September 22.
Cliff Asness’ AQR Capital owned over 3.2 million shares in Tyson Foods, Inc. worth $278.4 million, becoming the company’s largest stakeholder in Q2. Overall, 37 hedge funds tracked by Insider Monkey owned stakes in the food company in Q2, with a total value of $1.15 billion.
4. Weyerhaeuser Company (NYSE:WY)
Number of Hedge Fund Holders: 41
Dividend Yield as of September 22: 2.45%
Weyerhaeuser Company (NYSE:WY) is a Washington-based timberland company that has over 14 million acres of timberlands under long-term licenses in Canada. In addition to this, the company specializes in the production of wood products. It currently pays a quarterly dividend of $0.18 per share and has a yield of 2.45%, as of September 22.
In Q2 2022, Weyerhaeuser Company reported strong earnings. It posted an EPS of $1.06 and revenue of $2.97 billion, which beat estimates by $0.08 and $140 million, respectively. The company reported $1.14 billion in operating cash flow, up from $957 million in the previous quarter. Its free cash flow for the quarter came in at $800 million. The company ended the quarter with over $1.7 billion available in cash and cash equivalents, compared with $1.2 billion in the preceding quarter.
At the end of June 2022, 41 hedge funds in Insider Monkey’s database owned stakes in Weyerhaeuser Company, up from 40 in the previous quarter. The total value of these stakes is over $328.6 million, compared with $280 million worth of stakes owned by hedge funds a quarter earlier.
3. Lockheed Martin Corporation (NYSE:LMT)
Number of Hedge Fund Holders: 55
Dividend Yield as of September 22: 2.65%
Lockheed Martin Corporation is an American aerospace company that manufactures security and defense products. The company also engages in research and development of advanced technological systems. In August, RBC Capital initiated its coverage of the stock with a Sector Perform rating and a $460 price target. The firm called the company the largest defense contractor globally and appreciated its portfolio.
In Q2 2022, Lockheed Martin Corporation reported an operating cash flow of $1.3 billion, up from $1.26 billion in the same period last year. The company generated $1.02 billion in free cash flow during the quarter, compared with $950 million in the prior-year period. It returned $1.1 billion to shareholders through dividends and share repurchases.
Lockheed Martin Corporation currently offers $2.80 per share in quarterly dividends. The company has been paying consecutive dividends to shareholders since 1996 and maintains a 19-year streak of dividend growth. As of September 22, the stock has a dividend yield of 2.65%.
As per Insider Monkey’s Q2 2022 database, 55 hedge funds had positions in Lockheed Martin Corporation, compared with 56 a quarter earlier. The stakes owned by these hedge funds are valued at over $2.56 billion.
Old West Investment Management mentioned Lockheed Martin Corporation in its Q2 2022 investor letter. Here is what the firm has to say:
“As I sat in the theater watching Top Gun: Maverick, it gave me tremendous pride knowing we are shareholders of Lockheed Martin (NYSE:LMT). When the Top Gun: Maverick team was looking to push the envelope and stand true to Maverick’s need for speed, LMT’s Skunk Works was their first call. With Skunk Works expertise in developing the fastest known aircraft along with a passion for defining the future of aerospace, LMT is at the epicenter of our nation’s defense.
Based in Bethesda, Maryland, LMT is an American aerospace arms, defense, information security and technology company. LMT employs 115,000 people worldwide, including 60,000 engineers and scientists. LMT is the world’s largest defense contractor. They manufacture the F-16, F-22 and F-35 fighter jets, Sikorsky Black Hawk helicopters, Skunk Works technology, Javelin, Himars, and Tomahawk missile systems and much more…” (Click here to see the full text)
2. QUALCOMM Incorporated (NASDAQ:QCOM)
Number of Hedge Fund Holders: 71
Dividend Yield as of September 22: 2.43%
QUALCOMM Incorporated is a California-based multinational company that manufactures semiconductors and software and also provides wireless services to its consumers. The company has been making consistent dividend payments to its shareholders since 2003 and has raised its payouts at a CAGR of 6% in the last five years. It currently pays a quarterly dividend of $0.75 per share and has a yield of 2.43%, as of September 22.
In Q2 2022, QUALCOMM Incorporated reported revenue of $10.9 billion, which showed a 37.3% growth from the same period last year. The company generated $2.3 billion in free cash flow, up from $2.2 billion in the previous quarter. It returned $1.3 billion to shareholders during the quarter, $842 million of which represented the dividend payments. This shows that its dividends are secure within its FCF.
In September, Deutsche Bank lifted its price target on QUALCOMM Incorporated to $170 and kept a Buy rating on the shares, highlighting the company’s differentiated technology portfolio and its unique go-to-market strategy.
At the end of Q2 2022, 71 hedge funds in Insider Monkey’s database owned stakes in QUALCOMM Incorporated, down from 73 in the previous quarter. These stakes hold a collective value of over $2.8 billion. Ken Griffin and D. E. Shaw were some of the company’s major stakeholders in Q2.
1. Johnson & Johnson (NYSE:JNJ)
Number of Hedge Fund Holders: 83
Dividend Yield as of September 22: 2.72%
Johnson & Johnson is an American multinational pharmaceutical company that also specializes in other household and consumer products. On September 14, the company’s board announced the authorization of a buyback program for stock worth $5 billion. This was attributed to the company’s strong free cash flow and lowest levels of debt in five years. In Q2 2022, the company generated $4.7 billion in free cash flow, up from $3.37 billion in the previous quarter.
Johnson & Johnson holds one of the strongest dividend growth track records in the US market, raising its payouts for 60 years consistently. The company currently pays a quarterly dividend of $1.13 per share, with a dividend yield of 2.72%, as recorded on September 22.
In July, SVB Securities maintained its Outperform rating on Johnson & Johnson with a $194 price target, as the demand for the company’s key products and segments gain momentum. Moreover, the firm also appreciated the management’s effort to keep costs in check.
As of the close of Q2 2022, 83 hedge funds tracked by Insider Monkey owned stakes in Johnson & Johnson, with a total value of over $6.7 billion. In the previous quarter, 83 hedge funds owned stakes in the pharmaceutical company as well, worth over $7.4 billion.
Mayar Capital mentioned Johnson & Johnson in its Q2 2022 investor letter. Here is what the firm has to say:
“J&J is currently our largest position and a long-standing holding. The majority of the group’s sales comes from its collection of pharmaceutical franchises, but a large majority (~45%) comes from its collection of medical device businesses and its consumer brands.
Here’s how JNJ make and spend a dollar of revenues: As of 2021, about 55 cents of that dollar comes from its pharmaceutical sales – sales of drugs to pharmacies and distributors – while 30 cents come from the sale of medical devices, such as surgery equipment and orthopaedics. The rest of that dollar in sales comes from sales of JNJ’s consumer brands such as Listerine mouthwash, Nicorette nicotine tablets and Neutrogena cosmetics.
To make that dollar, however, JNJ typically spends about 25 cents to make the products themselves and another 27 cents on marketing and general administrative functions. This leaves JNJ with about 48 cents on the dollar in profit…”
You can also take a look at 10 Dividend Stocks That Raised Their Dividends in 2022 and 10 Dow Jones Dividend Stocks With Over 1% Yield
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This article is originally published at Insider Monkey.
