In this article, we will take a look at some of the best dividend leaders according to Wall Street analysts.
Investors have long been drawn to dividend stocks due to their financial stability and impressive returns, which have consistently outperformed other asset classes over the years. While these stocks may be underperforming at the moment, their long-term returns make them an attractive choice for investors. This means that building wealth through dividends requires patience, as the rewards accumulate over time rather than delivering instant results. The long-term performance of dividend stocks highlights their importance. According to a report by Hartford Funds, over the past several decades, dividends have been a major contributor to investor returns. Since 1960, reinvested dividends and the power of compounding have accounted for 85% of the cumulative total return of the broader market. The report also mentioned that in the 1940s, 1960s, and 1970s—periods when total returns were below 10%—dividends made a significant contribution to overall returns.
Investors often gravitate toward dividend-paying stocks during market downturns or periods of economic uncertainty. Companies with substantial payouts, such as those in utilities and consumer staples, are known for generating consistent earnings regardless of market conditions. However, during market rallies, these stocks typically underperform. This trend has been particularly noticeable since 2020, as mega-tech stocks have frequently driven the market to record highs.
Chris O’Keefe, a portfolio manager at Logan Capital Management, suggested that the growing performance gap between the broader market and dividend stocks this year presents an ideal opportunity for investors to consider buying dividend stocks. In addition to O’Keefe, several analysts are urging investors to focus on dividend stocks, citing their favorable outlook. The Dividend Aristocrats Index, which tracks 66 companies that have consistently increased their dividends annually for the past 25 years, has struggled to keep up with the broader market since 2020. Dividend-paying stocks experienced a resurgence in 2022, as recession fears prompted investors to turn to stable sectors like utilities and consumer goods. However, the rebound was short-lived. By 2023, rising interest rates pushed bond and money-market returns higher than dividend yields, leading major companies to adopt a cautious approach and tighten cash reserves amid economic uncertainty. This year, many of the same leading stocks from the Covid era have once again propelled the market to record highs.
The Dividend Aristocrats Index has risen nearly 5% since the beginning of 2024, while the broader market has returned 24%. Despite underperforming, dividend stocks remain a preferred choice for investors. A Morningstar report revealed that US exchange-traded funds (ETFs) focused on dividends held nearly $500 billion in investor assets by the fourth quarter of 2024, with additional billions in actively managed equity income funds. These funds have seen inflows this year, though much smaller compared to the $70 billion they attracted in 2022, which was a strong year for dividends.
Bank of America analyst Ohsung Kwon believes a resurgence in dividend stocks could be on the horizon. His team anticipates that the companies in the broader market will collectively boost their dividend payouts by 10% in 2025, driven by investor demand for cash. Reflecting this trend, even major tech firms have begun distributing dividends. In view of this, we will discuss some of the best dividend leaders according to analysts.
Photo by Vitaly Taranov on Unsplash
Our Methodology:
For this list, we scanned holdings of First Trust Morningstar Dividend Leaders Index Fund (FDL), which tracks the performance of the 100 highest-yielding stocks with consistent growth in dividends and can maintain their dividends in the future. From this list, we further refined our selection criteria by identifying stocks with a projected upside potential of over 15% based on analyst price targets, as of December 19. 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).
8. Duke Energy Corporation (NYSE:DUK)
Upside Potential as of December 19: 17.3%
Duke Energy Corporation (NYSE:DUK) is an American electric power and natural gas holding company that is primarily involved in the generation, transmission, distribution, and sale of electricity. the company’s utility portfolio, which is regulated by government agencies that determine its rates, provides a consistent revenue stream, ensuring stable cash flow for paying dividends and expanding its operations. The company is making significant investments to improve its operations and reduce its carbon footprint. According to analysts, these investments are expected to drive earnings per share growth at a rate of 5% to 7% annually through 2028, which is a solid growth rate for a large utility. This trajectory positions Duke Energy well to continue growing its dividend. the stock has surged by nearly 9.5% since the start of 2024.
In the third quarter of 2024, Duke Energy Corporation (NYSE:DUK) reported revenue of $8.15 billion, which showed a 2% growth from the same period last year. The revenue beat analysts’ estimates by $57.4 million. The Regulated electric segment generated operating revenues of $7.78 billion, reflecting a 1.8% increase compared to the previous year. This segment accounted for 95.4% of the total revenues for the quarter. Meanwhile, the Regulated natural gas segment saw revenues of $298 million, marking a 4.9% year-over-year increase.
Duke Energy Corporation (NYSE:DUK) also reported a solid cash position, as the company ended the quarter with $376 million available in cash and cash equivalents. in the first nine months of the year, the company generated an operating cash flow of $8.95 billion, up from $7.31 billion in the same period last year. It is one of the best dividend leaders on our list as the company has a 98-year run of paying regular dividends to shareholders. Moreover, it has raised its payouts for 13 consecutive years. The company pays a quarterly dividend of $1.045 per share and has a dividend yield of 3.9%, as of December 19.
The number of hedge funds tracked by Insider Monkey owning stakes in Duke Energy Corporation (NYSE:DUK) grew to 46 in Q3 2024, from 37 in the previous quarter. These stakes have a total value of over $1.66 billion. With roughly 4.4 million shares, GQG Partners was the company’s leading stakeholder in Q3.
7. Huntington Bancshares Incorporated (NASDAQ:HBAN)
Upside Potential as of December 19: 19.1%
Huntington Bancshares Incorporated (NASDAQ:HBAN) is an Ohio-based bank holding company that offers a wide range of banking products and services to its consumers. The year 2023 posed challenges for several regional banks due to the rapid rise in interest rates, leaving some struggling to adapt. In response, Huntington Bancshares took action to safeguard itself from the potential impact of further interest rate hikes. The bank introduced a pay-fixed swaption program, which acted like insurance on its portfolio. This program was designed to protect the market value of its securities if interest rates were to rise by an additional two to three percentage points, providing a hedge against future rate shocks.
Huntington Bancshares Incorporated (NASDAQ:HBAN) is generating solid returns this year, surging by nearly 24% since the start of 2024. In the third quarter of 2024, the company posted revenue of $1.89 billion, which was flat when compared to the same period last year, but surpassed analysts’ estimates by $30 million. The company achieved strong loan growth and continued to gather deposits during the quarter, while actively implementing its down-rate action plans. In addition, it also showed a strong performance in its value-added fee businesses.
During the quarter, Huntington Bancshares Incorporated (NASDAQ:HBAN)’s credit performance remained strong, with stable net charge-offs and improved ratios for nonperforming and criticized assets, aligning with the company’s moderate-to-low risk approach. Customer strength and resilience continued to support an optimistic outlook. The company expects loan growth to accelerate in the fourth quarter, driven by its core businesses and successful implementation of new initiatives, which are exceeding expectations. With robust loan pipelines entering the fourth quarter, it believes this growth momentum will lay the groundwork for increased revenue and profitability in 2025.
Huntington Bancshares Incorporated (NASDAQ:HBAN), one of the best dividend leaders, has been making regular dividends to shareholders since 1989. The company offers a quarterly dividend of $0.155 per share and has a dividend yield of 3.9%, as of December 19.
At the end of Q3 2024, 34 hedge funds tracked by Insider Monkey held stakes in Huntington Bancshares Incorporated (NASDAQ:HBAN), up from 32 in the previous quarter. The consolidated value of these stakes is over $445.6 million. Among these hedge funds, Point72 Asset Management was the company’s leading stakeholder in Q3.
6. The Kraft Heinz Company (NASDAQ:KHC)
Upside Potential as of December 19: 19.4%
With an upside potential of 19.4%, The Kraft Heinz Company (NASDAQ:KHC) ranks sixth on our list of the best dividend leaders. The American multinational food company specializes in a wide range of snacks and beverages. The company, formed through the 2015 merger of Kraft and Heinz, has not achieved the expected results from the merger. As a result, it is now refocusing its strategy by eliminating underperforming products and concentrating on its core offerings. Despite these challenges, income investors can take comfort in the company’s strong cash position. In its latest quarter, Kraft Heinz demonstrated solid cash generation, with year-to-date operating cash flow increasing by 6.7% to $2.8 billion compared to the previous year. Free cash flow reached $2 billion, reflecting a 9.7% year-over-year growth. Moreover, the company returned $1.5 billion to shareholders through dividends in the first nine months of the year.
Overall, The Kraft Heinz Company (NASDAQ:KHC) posted mixed earnings, continuing to fall short of analysts’ estimates. It reported $6.38 billion in revenue, marking a 2.85% decline from the same period last year. However, the company saw an improvement in its gross profit margin, which rose by 20 basis points to 34.2%. Kraft Heinz remains focused on investing in marketing, research and development, and technology to provide value-driven solutions for consumers and support future revenue growth. These efforts are bolstered by the company’s ability to optimize operations and maintain strong cash flow. Furthermore, it is committed to expanding both its established and emerging food and beverage brands on a global scale.
Mairs & Power also highlighted efforts made by The Kraft Heinz Company (NASDAQ:KHC) in its Q3 2024 investor letter. Here is what the firm has to say:
“We added The Kraft Heinz Company (NASDAQ:KHC) to the Fund in the quarter. Kraft Heinz is a leading global food company which possesses a portfolio of iconic brands, including its eponymous ketchup brand. The company has been undergoing an operational transformation focused on driving efficiency gains in supply chain, manufacturing and distribution. These efficiency gains have fueled increased investments in technology, automation, innovation and marketing, which should ultimately drive more consistent organic revenue growth and high single digit earnings per share growth. We expect above-average long-term returns, buoyed by consistent free cash flow generation, opportunistic share repurchases and an attractive 4-5% dividend yield. A modest current valuation affords an ample margin of safety.”
The Kraft Heinz Company (NASDAQ:KHC) currently pays a quarterly dividend of $0.40 per share and has a dividend yield of 5.32%, as recorded on December 19.
As of the close of Q3 2024, 38 hedge funds in Insider Monkey’s database held stakes in The Kraft Heinz Company (NASDAQ:KHC), compared with 43 in the preceding quarter. These stakes have a total value of over $12 billion. With nearly 326 million shares, Berkshire Hathaway was the company’s leading stakeholder in Q3.
5. Pfizer Inc. (NYSE:PFE)
Upside Potential as of December 19: 22.4%
Pfizer Inc. (NYSE:PFE) is a New York-based pharmaceutical industry company that specializes in a wide range of medications and vaccines. The company gained significant attention during the pandemic for developing vaccines. However, this recent success, driven by its COVID-19 vaccine and treatment pill, has led some investors to perceive it as a stock that may have peaked. With a sharp decline in vaccine demand, concerns have arisen about potential changes in vaccine policy under the incoming Trump administration, further heightening investor uncertainty. The stock has fallen by over 13% in 2024 so far.
Despite concerns, Pfizer Inc. (NYSE:PFE) posted strong earnings in its latest quarter. The company generated $17.7 billion in revenue, marking a notable 32% increase compared to the same period last year. Its Oncology portfolio continued to perform well, with significant contributions from products like Padcev, Xtandi, Lorbrena, and Braftovi/Mektovi. In addition, the company successfully met the heightened demand for Paxlovid during the recent surge in COVID-19 cases.
Pfizer Inc. (NYSE:PFE) remains in strong financial health, as evidenced by its solid cash position. In the first nine months of 2024, the company returned $7.1 billion to shareholders through dividends. With a quarterly dividend of $0.42 per share, the stock offers an appealing dividend yield of 6.67% as of December 19. Known for its reliable payouts, the company has consistently increased its dividends for 14 years, making it one of the best dividend leaders on our list.
Parnassus Investments highlighted Pfizer Inc. (NYSE:PFE) in its Q1 2024 investor letter. Here is what the firm has to say:
“During the quarter, we added new positions in Pfizer Inc. (NYSE:PFE), NICE and Charter Communications. We purchased Pfizer to capture the potential upside from any turnaround following the COVID-induced boom-bust cycle of the last few years. Pfizer’s stock price sank by more than 40% in 2023 as COVID-19 vaccine revenues rolled off, providing an attractive entry point for us. The company completed its acquisition of Seagen, which should strengthen Pfizer’s pipeline in antibody-drug conjugates (ADC). Pfizer also offers an attractive dividend yield.”
Of the 900 hedge funds tracked by Insider Monkey at the end of Q3 2024, 80 hedge funds held stakes in Pfizer Inc. (NYSE:PFE), compared with 84 in the previous quarter. These stakes are collectively valued at over $3 billion.
4. LyondellBasell Industries N.V. (NYSE:LYB)
Upside Potential as of December 19: 30.7%
LyondellBasell Industries N.V. (NYSE:LYB) is a multinational chemical industry company that specializes in plastics, chemicals, and refining. Despite facing challenging global macroeconomic conditions, the company was able to capitalize on its strong North American operations, benefiting from favorable ethylene margins in the region. Demand for polyethylene and polypropylene in North America rose by over 7% and 4%, respectively, through September, compared to 2023 levels. In the third quarter, the company’s volumes were bolstered by high operating rates at its crackers, enabling it to take advantage of improved margins from merchant ethylene sales. Its quarterly revenue totaled $10.32 billion, marking a 2.8% decline from the same period last year.
In addition to reporting strong earnings, LyondellBasell Industries N.V. (NYSE:LYB) took a major step forward in its sustainability efforts by starting construction on its MoReTec-1 facility in Germany. This project highlights the company’s dedication to advancing the industry’s transition to a circular economy.
LyondellBasell Industries N.V. (NYSE:LYB) currently pays a quarterly dividend of $1.34 per share and has a dividend yield of 7.35%, as of December 19. The company continues to be a popular choice for dividend-focused investors, backed by its strong cash reserves that enable substantial dividend payouts. In the third quarter of 2024, the company returned $479 million to shareholders through dividends and share buybacks. It also generated $670 million in operating cash flow for the quarter.
The company’s strong cash position has allowed it to increase its payouts for 14 consecutive years. In the past five years, it has raised its payouts at an annual average rate of nearly 5%. According to analysts, the stock has an upside potential of 30.7%.
LyondellBasell Industries N.V. (NYSE:LYB) was included in 38 hedge fund portfolios at the end of Q3 2024, as per Insider Monkey’s database. The stakes held by these funds have a total value of over $546.2 million.
3. Dow Inc. (NYSE:DOW)
Upside Potential as of December 19: 32.3%
Dow Inc. (NYSE:DOW) ranks third on our list of the best dividend leaders. The American chemicals company mainly operates in the material science industry and is involved in the manufacturing and marketing of a wide range of chemical, plastic, and agricultural products.
Dow Inc. (NYSE:DOW) operates across three main segments: packaging and specialty plastics, industrial intermediates and infrastructure, and performance materials and coatings. Like other businesses in commodity-driven industries, such as oil and gas or gold mining, the company cannot control commodity prices. Instead, it focuses on managing costs to produce its products as efficiently as possible. However, the company faces challenges from a global slowdown affecting commodity and specialty chemical companies, petrochemical firms, and refiners. Many major refining companies have lost earlier gains, and other chemical companies have also seen their stock values decline. The stock is down by over 29% since the start of 2024.
Due to these challenges, the company posted mixed earnings. In the third quarter of 2024, Dow Inc. (NYSE:DOW) reported revenue of $10.88 billion, up 1.4% from the same period last year. Volume grew by 1% compared to the prior-year period, with the increase driven by gains in Performance Materials & Coatings. Operating cash flow was $800 million, a decrease of $858 million year-over-year. This decline was mainly due to higher inventory levels needed to support sales growth, as well as labor-related supply chain disruptions. Its free cash flow also declined to $64 million, compared with $1.06 billion in the same quarter last year.
Despite these setbacks, Dow Inc. (NYSE:DOW) continues to be an excellent option for income-focused investors due to its strong dividend offerings. In the most recent quarter, it returned $490 million to shareholders through dividends. Moreover, the company has never missed a dividend payment since 1912. Currently, it offers a quarterly dividend of $0.70 per share and has a dividend yield of 7.16%, as of December 19.
According to Insider Monkey’s database of Q3 2024, 31 hedge funds owned stakes in Dow Inc. (NYSE:DOW), compared with 32 in the previous quarter. The overall value of these stakes is more than $1.2 billion.
2. Diamondback Energy, Inc. (NASDAQ:FANG)
Upside Potential as of December 19: 40.3%
Diamondback Energy, Inc. (NASDAQ:FANG) is a Texas-based company that engages in the exploration of hydrocarbons. In September, the company completed its merger with Endeavor Energy Resources, strengthening its midstream operations. These moves are expected to increase its scale and lower costs, better positioning the company to withstand potential declines in oil prices. As a result, its recent stock dip driven by oil market fluctuations may present an appealing buying opportunity for investors looking for a significant upside in the oil sector. The stock is down by nearly 3% in the past 12 months.
In the third quarter of 2024, Diamondback Energy, Inc. (NASDAQ:FANG) reported revenue of $2.65 billion, up by over 13% from the same period last year. During the quarter, the company drilled 71 wells in the Midland Basin and five wells in the Delaware Basin. It brought 87 operated wells online in the Midland Basin and eight wells in the Delaware Basin, with an average lateral length of 12,238 feet.
Diamondback Energy, Inc. (NASDAQ:FANG)’s cash position also came in strong. The company generated an operating cash flow of $1.2 billion and its free cash flow came in at $708 million. During the quarter, it returned $780 million to shareholders, representing approximately 78% of its Adjusted Free Cash Flow. This included stock buybacks and the declared base dividend for the quarter.
Diamondback Energy, Inc. (NASDAQ:FANG), one of the best dividend leaders, started paying dividends in 2018 and has remained regular with its payouts over these years. The company currently offers a quarterly dividend of $0.90 per share and has a dividend yield of 5.42%, as of December 19.
Insider Monkey’s database of Q3 2024 indicated that 49 hedge funds held stakes in Diamondback Energy, Inc. (NASDAQ:FANG), growing from 44 in the previous quarter. The consolidated value of these stakes is over $1.67 billion. With over 2.1 million shares, Diamond Hill Capital was the company’s leading stakeholder in Q3.
1. CVS Health Corporation (NYSE:CVS)
Upside Potential as of December 19: 54.2%
CVS Health Corporation (NYSE:CVS) is an American healthcare company that operates a retail pharmacy chain. The company utilizes its extensive retail network to provide access to a wide array of health services and pharmacy benefits, supported by its Aetna health insurance division, which serves over 27 million members. Although this vertically integrated model aims to deliver cost savings and efficiency throughout the healthcare supply chain, recent performance has fallen short of expectations. Increased enrollment in its health plans, especially among seniors in Medicare Advantage programs, combined with high service utilization and persistent cost pressures, has negatively affected profitability. The stock is down by nearly 46% since the start of 2024.
That said, CVS Health Corporation (NYSE:CVS) reported strong earnings in the third quarter of 2024. The company’s revenue of $95.4 billion grew by over 6.3% on a YoY basis. The results showcased robust performance in the Health Services and Pharmacy & Consumer Wellness segments. However, they also emphasized the ongoing need for a collaborative approach across the enterprise to address macroeconomic challenges impacting the Health Care Benefits segment.
In the first nine months of the year, CVS Health Corporation (NYSE:CVS) generated an operating cash flow of $7.2 billion. The company ended the quarter with $6.9 billion available in cash and cash equivalents. Though the company does not hold any dividend growth streak, it has been making regular dividend payments to shareholders since 1997. Its quarterly dividend comes in at $0.665 per share for a dividend yield of 6.08%, as of December 19. With an upside potential of 54.2%, CVS is one of the best dividend leaders on our list.
As of the end of Q3 2024, 63 hedge funds, growing from 60 in the previous quarter, held stakes in CVS Health Corporation (NYSE:CVS), according to Insider Monkey’s database. The overall value of these stakes is over $4.2 billion.
Overall, CVS Health Corporation (NYSE:CVS) ranks first on our list of the best dividend leaders according to analysts. While we acknowledge the potential for CVS to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than CVS but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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