In this article, we will take a look at some of the best cash-rich stocks that pay dividends.
Cash remains a critical asset, as companies with strong cash reserves tend to attract investors regardless of the economic climate. A robust cash position allows businesses to enhance shareholder value through activities such as paying dividends, buying back shares, or pursuing strategic acquisitions. That said, cash has underperformed compared to other assets, but with yields at their highest in years and economic and inflation uncertainty, many people have chosen to keep their extra funds in money markets, certificates of deposit, high-yield savings accounts, and Treasury bills. A survey conducted in July by Empower found that 49% of Americans felt more secure holding cash than other investments. The survey, which polled 1,009 US adults, also found that cash made up more than 27% of respondents’ portfolios. However, financial experts like Luis Alvarado, global fixed income strategist at Wells Fargo Investment Institute, generally recommend keeping only 3% to 5% of a portfolio in cash for emergencies and liquidity needs.
Also read: 10 Best Mid-Cap Dividend Aristocrats To Buy
The US financial markets are currently supported by an enormous pool of liquidity, with substantial funds held in money market accounts and other short-term investments. According to T. Rowe Price, US money market funds alone managed nearly $6 trillion in assets as of mid-December 2023—an increase of over 60% since December 2019, just before the onset of the pandemic. As of the week ending December 4, a record $6.77 trillion is held in money market funds, according to the Investment Company Institute. This amount is nearly half a trillion dollars higher than the funds held in September before the Federal Reserve implemented its first interest rate cut in four years, followed by another in November.
A report from treasury advisory firm Carfang Group noted that corporate cash reserves have steadily grown since the pandemic began. The ongoing strength of the economy has enabled companies to set aside more funds and earn returns on short-term investments. As of Q1 2024, US corporations increased their cash holdings to an all-time high of $4.11 trillion, driven by a robust economy and relatively high interest rates, which enhanced returns. This represents a 12.6% increase from the same period last year and $1.28 trillion more than pre-pandemic levels.
Despite market volatility driven by high interest rates and geopolitical tensions, corporate financial health has remained strong, showing resilience in the first half of the year. According to Bloomberg data, nearly 1 in 10 non-financial companies in the broader market—over 30 firms—earned more in interest income than they spent on debt expenses in the first quarter. While this figure has remained consistent with the previous year, the interest income generated by these companies has increased by approximately 60%. Mark Cabana, head of US rates strategy for Bank of America Corp.’s securities business, made the following comment about the situation:
“Corporates are earning more money by holding cash. Many companies are comfortable with where the economy is as well as with elevated cash levels because they are getting a return for it.”
Wells Fargo suggested that income investors might consider dividend-paying stocks, noting that US large-cap companies have amassed over $2.4 trillion in cash on their balance sheets and could opt to start or increase dividend payouts.
Our Methodology:
For this article, we began by using a stock screener to find companies with a price-to-free-cash-flow ratio below 15. From this list, we selected companies with a market capitalization of at least $20 billion. Next, we focused on companies with the highest trailing twelve-month operating cash flows, ranking the stocks in ascending order based on their TTM operating cash flows. 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. Cincinnati Financial Corporation (NASDAQ:CINF)
Operating Cash Flow (TTM): $2.58 billion
Cincinnati Financial Corporation (NASDAQ:CINF) is an Ohio-based insurance company that offers property and casualty insurance services to its consumers. The company’s primary business involves issuing insurance policies, such as those for automotive, property, and homeowners coverage. the stock is outperforming the market this year, surging by nearly 44% since the start of 2024.
Cincinnati Financial Corporation (NASDAQ:CINF) reported strong earnings in the third quarter of 2024. The company’s revenue of $3.32 billion showed a significant 83.3% increase from the same period last year. The revenue also beat analysts’ estimates by $790 million. The company reported a property casualty combined ratio of 97.4% for the third quarter of 2024, an increase from 94.4% in the same period in 2023. In addition, net written premiums grew by 17% in the third quarter, driven by price increases, premium growth initiatives, and a higher level of insured exposures.
On November 15, Cincinnati Financial Corporation (NASDAQ:CINF) declared a quarterly dividend of $0.81 per share, which fell in line with its previous dividend. The company holds one of the longest dividend growth streaks in the market, having raised its payouts by 63 consecutive years. The stock’s dividend yield on December 16 came in at 2.13%. With a trailing twelve-month operating cash flow of nearly $2.6 billion, CINF is one of the best cash-rich stocks that pay dividends.
At the end of Q3 2024, 21 hedge funds tracked by Insider Monkey reported having stakes in Cincinnati Financial Corporation (NASDAQ:CINF), compared with 23 in the previous quarter. The consolidated value of these stakes is over $536.5 million. With over 1.1 million shares, Select Equity Group was the company’s leading stakeholder in Q3.
7. General Mills, Inc. (NYSE:GIS)
Operating Cash Flow (TTM): $3.55 billion
General Mills, Inc. (NYSE:GIS) is an American food processing company, headquartered in Minnesota. The company markets processed consumer food through retail stores. The company, with decades of experience, has consistently met customer expectations, particularly during the COVID-19 pandemic. During this period, the business saw a surge as more consumers opted for home-cooked meals due to restrictions on dining out. Its main North American retail division performed strongly, driven by increased demand for organic products, meal solutions, and baking essentials. The stock has delivered a nearly 23% return to shareholders since March 2020.
In September, General Mills, Inc. (NYSE:GIS) reported its fiscal Q1 2025 earnings and posted revenue of $4.85 billion. The revenue, which beat analysts’ estimates by $47.6 million, fell slightly by 1% on a YoY basis. The company reported an operating profit of $832 million. It strengthened its core operations by offering consumers more engaging experiences, which led to higher volumes, increased net sales, and improved market share trends compared to the previous quarter. Moreover, the company took steps to realign its portfolio for enhanced growth and profitability by announcing plans to sell its North American yogurt business to Lactalis and Sodiaal.
General Mills, Inc. (NYSE:GIS) has remained committed to its shareholder obligation, paying uninterrupted dividends for 125 years. The company’s robust dividend history is supported by its strong cash generation. In the latest quarter, it reported $624 million in operating cash flow, an increase from $378 million in the same period last year. Additionally, it distributed $338 million to investors through dividends. Its quarterly dividend comes in at $0.60 per share for a dividend yield of 3.66%, as of December 16.
As of the close of Q3 2024, 30 hedge funds in Insider Monkey’s database held stakes in General Mills, Inc. (NYSE:GIS), up from 29 in the previous quarter. These stakes have a total value of more than $674 million. Ken Griffin’s Citadel Investment Group was the company’s leading stakeholder in Q3.
6. The Kraft Heinz Company (NASDAQ:KHC)
Operating Cash Flow (TTM): $4.15 billion
The Kraft Heinz Company (NASDAQ:KHC) ranks sixth on our list of the cash-rich stocks that pay dividends. The American food company specializes in a wide range of snacks and beverages. The company delivered mixed earnings in the third quarter of 2024, despite having fallen short of investor expectations since its 2015 merger. In the third quarter of 2024, reported $6.38 billion in revenue, reflecting a 2.85% decline compared to the same period last year. However, the company’s gross profit margin improved by 20 basis points to 34.2%. Kraft Heinz continued to prioritize investments in marketing, research and development, and technology to deliver value-driven solutions for consumers and drive future revenue growth. These efforts are supported by its proven ability to optimize operations and maintain strong cash flow. In addition, the company remains committed to growing 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.”
Income investors can find reassurance in the company’s strong cash position and set aside other concerns. The Kraft Heinz Company (NASDAQ:KHC) reported a solid cash generation in its latest quarter. Year-to-date operating cash flow rose to $2.8 billion, a 6.7% increase from the same period last year. Free cash flow totaled $2 billion, reflecting a 9.7% year-over-year growth. In addition, the company returned $1.5 billion to shareholders through dividends over the first nine months of the year. Currently, it pays a quarterly dividend of $0.40 per share and has an attractive dividend yield of 5.17%, as of December 16.
Warren Buffett’s Berkshire Hathaway was the company’s leading stakeholder in Q3 2024. In addition, Arrowstreet Capital increased its stake in the company by 31% during Q3. Overall, The Kraft Heinz Company (NASDAQ:KHC) was included in 38 hedge fund portfolios at the end of Q3 2024, as per Insider Monkey’s database, with a total stake value amounting to over $12 billion.
5. Archer-Daniels-Midland Company (NYSE:ADM)
Operating Cash Flow (TTM): $4.73 billion
Archer-Daniels-Midland Company (NYSE:ADM) is an Illinois-based multinational food company that also specializes in food processing and commodities trading. The company specializes in transforming crops into products for food, animal feed, industrial uses, and energy. As a key player in the global agricultural sector, it manages a vast network for sourcing, transporting, and processing diverse agricultural commodities. Its operations require handling intricate supply chains while addressing the diverse needs of the market.
Since the start of 2024, Archer-Daniels-Midland Company (NYSE:ADM) has declined by nearly 29%. Moreover, the company fell short of investor expectations with its recent quarterly earnings. In the third quarter of 2024, it posted $20 billion in revenue, reflecting an 8% decline compared to the same period last year and missing analysts’ estimates by $1.57 billion. Looking ahead, the company anticipates weaker market conditions in the coming year but is implementing measures to enhance performance and create value. It also prioritizes productivity improvements, operational efficiency, and a disciplined approach to capital allocation.
Despite facing challenges, Archer-Daniels-Midland Company (NYSE:ADM) continued to generate strong cash flow. In the first nine months of the year, it reported an operating cash flow of about $2.5 billion, an increase from $1.9 billion during the same period last year. The company also stands out as one of the cash-rich stocks, boasting 51 consecutive years of dividend growth. It currently offers a quarterly dividend of $0.50 per share and has a dividend yield of 3.87%, as of December 16.
Of the 900 hedge funds tracked by Insider Monkey at the end of Q3 2024, 34 funds held stakes in Archer-Daniels-Midland Company (NYSE:ADM), compared with 35 in the previous quarter. These stakes are collectively valued at over $556.5 million.
4. Ford Motor Company (NYSE:F)
Operating Cash Flow (TTM): $14.7 billion
Ford Motor Company (NYSE:F) is an American automobile manufacturer that deals in the manufacturing of a wide range of commercial vehicles and luxury cars. The company’s earnings came in strong in the third quarter of 2024. It generated revenue of $46 billion, up 5% from the same period last year. The revenue surpassed analysts’ estimates by $744.5 million. This represents the company’s 10th consecutive quarter of YoY revenue growth, driven by a new and appealing product lineup that provides a wide range of choices for both retail and commercial customers.
Though Ford Motor Company (NYSE:F) has seen a nearly 18% decline in 2024 so far, it is not viewed as negatively by analysts as it may seem. J.D. Power, a well-known U.S. data analytics and consumer intelligence firm, published its 2024 US Initial Quality Study earlier this year, which showcased Ford’s improvements in recent years. The company made a significant jump of 14 spots, rising to 9th place on the list of brands with the fewest problems per 100 vehicles.
In addition, Ford Motor Company (NYSE:F) has also impressed investors with its solid cash generation. In the most recent quarter, the company generated $5.5 billion in operating cash flow and its free cash flow came in at $3.2 billion. It has supplemental dividends to investors regularly over the years and currently offers a quarterly dividend of $0.15 per share. One of the best cash-rich stocks offers an alluring dividend yield of 6.01%, as of December 16.
Insider Monkey’s database of Q3 2024 indicated that 36 hedge funds held stakes in Ford Motor Company (NYSE:F), worth $744.4 million in total. Among these hedge funds, Renaissance Technologies was the company’s leading stakeholder in Q3.
3. Chubb Limited (NYSE:CB)
Operating Cash Flow (TTM): $14.8 billion
Chubb Limited (NYSE:CB) ranks third on our list of the best cash-rich stocks that pay dividends. The insurance company offers a wide range of related products and services to its consumers. Insurance stocks are notable for their robust pricing power, which remains strong regardless of economic conditions. After catastrophic losses, insurers can raise premiums, and even when claims are lower, they can justify increases by highlighting future risks. In essence, insurers function as reliable, profit-generating entities.
Chubb Limited (NYSE:CB) stands out due to its focus on high-income customers, particularly in the homeowner insurance sector. Wealthier individuals are less likely to change their spending habits or default on bills and premiums during mild economic downturns, offering greater stability for the company. In the third quarter of 2024, the company reported a net income of $2.32 billion, which showed a 13.8% growth from the same period last year. The stock has returned by over 21% since the start of 2024.
In Q3, Chubb Limited (NYSE:CB) reported an operating cash flow of $4.55 billion, and its trailing twelve-month operating cash flow comes in at $14.8 billion. This solid cash position has allowed the company to raise its payouts for 31 consecutive years. Its quarterly dividend comes in at $0.91 per share for a dividend yield of 1.32%, as recorded on December 16.
The London Company made the following comment about CB in its Q3 2024 investor letter:
Initiated: Chubb Limited (NYSE:CB) – CB engages in the provision of commercial and personal property and casualty insurance, personal accident and health (A&H), reinsurance, and life insurance. While the company is headquartered outside the U.S., roughly 2/3 of its profits are generated in the U.S. with Asian markets representing another 20% of earnings. CB has a portfolio of top-performing, multibillion-dollar businesses that have substantial scale and yet potential for growth. CB has a culture of superior underwriting discipline, and management has a strong track record of expense control. CB also has a well-balanced mix of business by customer and product, with extensive distribution channels. We are attracted to CB’s globally diversified business model, superior underwriting and expense management, consistent and best-in-class profitability, upside potential from growth in Asia, and the potential to benefit from higher interest rates in its investment portfolio.
As per Insider Monkey’s database of Q3 2024, 51 hedge funds held stakes in Chubb Limited (NYSE:CB), growing from 46 in the preceding quarter. These stakes are worth over $10 billion in total. Warren Buffett’s Berkshire Hathaway owned the largest stake in the company, valued at $7.8 billion.
2. Bristol-Myers Squibb Company (NYSE:BMY)
Operating Cash Flow (TTM): $15 billion
Bristol-Myers Squibb Company (NYSE:BMY) is a multinational pharmaceutical company. It has been attracting investors’ attention with its consistent innovation and product launches. Since 2019, the company has introduced several new medications and continues to make notable advancements. In September this year, the US Food and Drug Administration approved Cobenfy, a treatment for schizophrenia. While this approval is not recent, Bristol Myers’ shares have recently risen thanks to positive updates surrounding Cobenfy. The stock has surged by nearly 6% since the start of 2024.
Bristol-Myers Squibb Company (NYSE:BMY) reported nearly $12 billion in revenue in the third quarter of 2024, marking an 8.5% increase from the same period last year. This strong performance was driven by higher sales from its expanding oncology portfolio and efficient operational management. The results highlighted the company’s ability to navigate competitive pressures while achieving significant revenue growth. By the end of the quarter, the company had approximately $8 billion in cash and cash equivalents.
Bristol-Myers Squibb Company (NYSE:BMY) is a solid dividend payer, having increased its payouts for 18 consecutive years. With strong cash reserves, the company has the flexibility to increase its payouts in the future. Over the trailing twelve months, its operating cash flow totaled $15 billion, and its levered free cash flow amounted to $17.52 billion. The company pays a quarterly dividend of $0.60 per share and has a dividend yield of 4.44%, as of December 16.
The number of hedge funds tracked by Insider Monkey holding stakes in Bristol-Myers Squibb Company (NYSE:BMY) grew to 70 in Q3 2024, from 61 in the previous quarter. These stakes have a collective value of more than $3.3 billion.
1. Chevron Corporation (NYSE:CVX)
Operating Cash Flow (TTM): $35 billion
Chevron Corporation (NYSE:CVX) is an American energy company that specializes in oil and gas. The company has evolved into one of the world’s top energy companies. Each year, it invests billions to expand its operations, using both organic growth and acquisitions to drive expansion. These investments enhance profitability and cash flow. In the third quarter of 2024, the company generated $9.7 billion in operating cash flow, up from $6.3 billion in the previous quarter. It also returned $7.7 billion to shareholders through dividends and share repurchases during the quarter. CVX is one of the best cash-rich stocks that pay dividends.
Chevron Corporation (NYSE:CVX) posted strong earnings in the third quarter of 2024, with revenues totaling $50.67 billion, exceeding analysts’ expectations by $1.63 billion. The company also saw a 7% increase in global production compared to the previous year, reaching nearly 3.4 million barrels of oil equivalent per day (BOE/d). This growth was driven by record production in the Permian Basin and the acquisition of PDC Energy.
On November 1, Chevron Corporation (NYSE:CVX) declared a quarterly dividend of $1.63 per share, which fell in line with its previous dividend. Overall, the company has been rewarding shareholders with growing dividends for the past 37 consecutive years. As of December 16, the stock offers a dividend yield of 4.37%.
As of the end of Q3 2024, Chevron Corporation (NYSE:CVX) was included in 63 hedge fund portfolios, slightly down from 64 in the previous quarter, according to Insider Monkey’s database. The total value of the stakes held by these hedge funds exceeds $21 billion.
Overall, Chevron Corporation (NYSE:CVX) ranks first on our list of cash-rich stocks. While we acknowledge the potential for CVX 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 CVX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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