In this article, we will take a look at some of the best dividend aristocrat stocks according to yields.
Investors have always put income at the top of their list. And when it comes to raking in money, you can’t beat dividend stocks. Research by S&P Dow Jones Indices has demonstrated that over the long haul, dividend-paying companies have outperformed non-dividend companies and the broader market on a risk-adjusted basis. Though investing in high dividend yields is not advised by analysts, recent research indicates that dividend yield is a risk factor that pays off, historically earnings higher returns than a market-cap-weighted benchmark. When paired with other factors like volatility, quality, momentum, size, and value, dividend yield strategies can potentially tap into systematic sources of returns.
Dividend yield and dividend growth have always been a hot topic among investors. But little did they realize that dividend yield is a key piece of the puzzle when it comes to dividend growth. When it comes to the Dividend Aristocrats Index, the knack for increasing dividends for 25 straight years doesn’t mean sacrificing yield. The index has consistently outshone its benchmark by delivering higher yields, typically between 2% and 2.9% over the past 26 years ending 2023. On average, the index’s yield was 2.5%, compared to the market’s 1.8%. To read more about high dividend stocks, have a look at Best Dividend Stocks Yielding at Least 7% According to Hedge Funds.
In addition to offering solid yields, dividend aristocrats are also less volatile than other asset classes. According to a report by S&P Dow Jones Indices, the Dividend Aristocrats Index has outpaced the broader market over the long haul with less volatility, which is indicated by its higher risk-adjusted returns. The index’s ability to provide downside protection is evident in its upside and downside capture ratio. These stocks have outperformed the market in 69.34% of down months and 43.61% of up months. Moreover, the Dividend Aristocrats Index has experienced lower drawdowns compared to the benchmark index. The report further mentioned that the index delivered an average excess return of 1.05% during down months compared to the broad-based benchmark.
Data from 2023 highlights how eager companies are to boost their dividends. This isn’t just a knee-jerk move to lure investors; it’s backed by robust corporate balance sheets, with companies raking in more cash flows than ever before. According to Janus Henderson, corporate cash flow remained strong in 2023 across most sectors, giving companies ample resources for dividends and share buybacks. As a result, global dividend growth saw a 5% increase for the year, aligning with the long-term trend. The firm also gave a positive outlook for dividends in 2024. It said that dividends appear solidly supported this year, although one-time special dividends are expected to decrease from the record levels observed over the past three years. The firm’s forecast predicts $1.72 trillion in dividends for 2024, marking a 3.9% increase on a headline basis, which translates to a 5% growth rate on a headline basis.
There are many dividend aristocrats that offer solid yields to shareholders. In this article, we will take a look at some of the best dividend aristocrat stocks with high yields.
photo by scott graham on Unsplash
Our Methodology:
For this list, we looked at a group of 67 dividend aristocrat companies, which are known for raising dividends for 25 years or more. From this list, we chose 10 stocks with the highest dividend yields as of June 25 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 920 funds as of Q1 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).
10. Hormel Foods Corporation (NYSE:HRL)
Dividend Yield as of June 25: 3.68%
Hormel Foods Corporation (NYSE:HRL) is a Minnesota-based food processing company that mainly specializes in marketing and production of a wide range of consumer-branded food and meat products. The company is currently dealing with business headwinds compared to its competitors in passing on its increasing costs to customers. Avian flu outbreaks have significantly impacted the company’s turkey operations. However, it has a proven track record of navigating the consumer staples market successfully. As a Dividend King, the company has weathered tough economic conditions over the past 50 years while consistently rewarding investors.
In fiscal Q2 2024, Hormel Foods Corporation (NYSE:HRL) reported mixed earnings because of ongoing business challenges. Despite this, the company managed to report stable volumes across different segments. In fact, its Foodservice volumes grew by 2.9% from the same period last year. The company posted a strong first half, with consecutive quarters of earnings surpassing expectations and a significant boost in operating cash flows. In addition, it advanced its strategic initiatives and remains on course to fulfill its commitments to enhance business performance and drive long-term growth and returns for shareholders. Year-to-date, the company generated over $640 million in operating cash flow, which showed a 55% growth from the same period last year.
Hormel Foods Corporation (NYSE:HRL) is one of the best dividend aristocrat stocks on our list as the company has been growing its dividends for the past 58 consecutive years. The company pays a quarterly dividend of $0.2825 per share and has a dividend yield of 3.70%, as of June 25.
At the end of Q1 2024, 27 hedge funds tracked by Insider Monkey reported having stakes in Hormel Foods Corporation (NYSE:HRL), up from 25 in the previous quarter. These stakes have a total value of over $604.3 million. With over 2.6 million shares, Millennium Management was the company’s leading stakeholder in Q1.
9. International Business Machines Corporation (NYSE:IBM)
Dividend Yield as of June 25: 3.86%
With a dividend yield of 3.86% as of June 25, International Business Machines Corporation (NYSE:IBM) ranks ninth on our list of the best dividend aristocrat stocks. The New York-based tech company announced a 0.6% hike in its quarterly dividend on April 30 to $1.67 per share. Through this increase, the company stretched its dividend growth streak to 29 years.
International Business Machines Corporation (NYSE:IBM) reported mixed earnings in the first quarter of 2024. The company’s revenue of $14.4 billion missed analysts’ consensus by $80 million and its adjusted earnings per share of $1.68 was $0.09 below expectations. Overall, the company had a solid first quarter, with its main segments experiencing growth. Total revenue increased by 3% YoY in constant currency, free cash flow surged to $1.9 billion, and profit margins expanded. Software revenue climbed 6%, boosted by Red Hat and artificial intelligence (AI), while the infrastructure segment grew even though it is two years into the current mainframe product cycle.
One of the primary challenges currently facing International Business Machines Corporation (NYSE:IBM) is its Consulting business, which is a major competitive advantage for the company. The company is experiencing increased pressure regarding discretionary projects as clients become more hesitant to invest in smaller, non-essential projects due to economic uncertainty. The good news is that consulting for AI-related projects is thriving. International Business Machines Corporation (NYSE:IBM) has secured over $1 billion in business related to generative AI, including its Watsonx platform. This total comprises both consulting and software, but it is predominantly weighted toward consulting. Since the start of 2024, the stock has delivered over 7.5% returns to shareholders.
As of the close of Q1 2024, 49 hedge funds in Insider Monkey’s database reported having stakes in International Business Machines Corporation (NYSE:IBM), down slightly from 50 in the previous quarter. The consolidated value of these stakes is over $1 billion.
