We recently published a list of Dividend Achievers List: Top 15. In this article, we are going to take a look at where Black Hills Corporation (NYSE:BKH) stands against other dividend achievers.
Dividend investing has become increasingly popular over time, as generating regular income remains a key focus for investors. Companies that consistently raise their dividends are particularly appealing, offering not just earnings but the potential for increasing income. Investors typically look for a minimum of 10 years of dividend growth, which is where “dividend achievers” come in. These are companies that have raised their dividends for at least 10 consecutive years.
Dividends play an important role in the overall returns. Over the past 25 years, nearly half of the total return from U.S. equities has come from reinvested dividends and the power of compounding. The broader market achieved an average annual total return of 7.4% during this period, with 55% coming from price gains and 45% from reinvested dividends, as reported by Bloomberg.
Dividend growth stocks have consistently delivered solid returns over time. The Dividend Aristocrats Index, which tracks companies that have increased their dividends for at least 25 consecutive years, has performed well historically. In a January 2019 blog post titled “Exploring Dividend Growth Strategies for Market Downturns,” Phillip Brzenk, S&P’s global head of multi-asset indexes, examined the performance of dividend growth strategies, particularly during market downturns. It was noted that the dividend aristocrats index outperformed the market in 53% of cases, with an average outperformance of 0.16%. In declining markets, the aristocrats outperformed over 70% of the time, with an average gain of 1.13%. However, in rising markets, they underperformed 56% of the time, though the average underperformance was smaller, at -0.34%. This suggests that the dividend aristocrats provided downside protection during months when the broader market experienced losses.
Dividend growers can also help protect against inflation. As rising prices erode investors’ wealth, companies that consistently increase their dividends offer a way to counteract this. While interest rates may seem appealing today, they might not hold the same value in the future. On the other hand, investing in companies with strong business models, assets, and strategies that support long-term dividend growth is often more attractive than opting for short-term, higher-yield investments. A report by Abrdn PLC also highlighted that, over the past 20 years, companies that began paying dividends or consistently increased them outperformed the global index. These dividend growers and initiators also outshined companies that paid dividends without increasing them, as well as those that didn’t pay dividends at all. In addition, the report noted that dividend-growing companies experienced lower volatility and delivered better risk-adjusted returns during this period.
That said, high-yield dividend stocks aren’t necessarily a poor choice. Analysts suggest seeking yields in the 3% to 6% range. According to Nuveen, stocks that pay dividends and also show steady dividend growth can be a sign of quality, as they demonstrate a company’s ability to balance dividend payouts while reinvesting capital to support future growth. With this, we will discuss the dividend achievers’ list.
Our Methodology:
For this list, we looked at a group of dividend achievers, which are known for raising dividends for 10 years or more. From this list, we chose companies with the highest dividend yields as of September 22 and arranged them in order from lowest to highest yield.
We also measured hedge fund sentiment around each stock according to Insider Monkey’s database of 912 funds as of Q2 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).
A line of wind turbines against a clear sky, reflecting the companies clean energy efforts.
Black Hills Corporation (NYSE:BKH)
Dividend Yield as of September 22: 4.28%
Black Hills Corporation (NYSE:BKH) ranks seventh on our dividend achievers list. The American natural gas distribution company provides electric and gas utility services across the country. The stock is underperforming the broader market this year so far, returning over 11%. A key factor behind the stock’s decline was the company’s higher leverage compared to many of its peers, which became a drawback as interest rates increased. However, with the US central bank cutting interest rates for the first time in four years, the company is now better positioned to improve its performance.
Black Hills Corporation (NYSE:BKH) continues to make strides in its customer-focused strategy and is looking forward to powering Meta’s new AI data center in Cheyenne, which is expected to come online in 2026. The team remains successful in attracting new data centers due to its top-tier reliability and innovative energy solutions, including specialized tariffs and a capital-light energy procurement model.
Black Hills Corporation (NYSE:BKH) is a strong dividend payer with 54 consecutive years of dividend growth. The company pays a quarterly dividend of $0.65 per share and has a dividend yield of 4.28%, as of September 22. In the past five years, it has raised its payouts at an annual average rate of nearly 5%.
As of the close of Q2 2024, 22 hedge funds in Insider Monkey’s database owned stakes in Black Hills Corporation (NYSE:BKH), compared with 27 in the previous quarter. These stakes have a consolidated value of $136 million. With over 1.1 million shares, AQR Capital Management was the company’s leading stakeholder in Q2.
Overall, BKH ranks 7th on our list of Dividend Achievers. Overall, BKH ranks first on our list. While we acknowledge the potential of BKH as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than BKH but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
