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.
8. Stanley Black & Decker, Inc. (NYSE: SWK)
Dividend Yield as of June 25: 3.90%
Stanley Black & Decker, Inc. (NYSE:SWK) is a Connecticut-based manufacturing company that specializes in industrial tools and household hardware. In June, Barclays downgraded the stock to Equal Weight with an $86 price target as the firm noted that the company is experiencing weak demand from consumers and DIY enthusiasts. The firm further mentioned that for the stock to perform well, rapid increases in earnings per share (EPS) will likely be necessary, but Barclays believes that current market EPS estimates are overly optimistic.
We agree with Barclays’ observation about consumer weakness, as Stanley Black & Decker, Inc. (NYSE:SWK) described its Q1 2024 consumer demand as ‘muted’ and noted a decline in volumes within its infrastructure segment. That said, the company dominates the Tools & Outdoor segment, which saw its margin increase to 7.8% YoY, up 720 basis points from the previous year. The segment’s revenue for the quarter fell slightly by 1% from the same period last year. In addition, Stanley Black & Decker, Inc. (NYSE:SWK) exceeded analysts’ estimates in the first quarter of 2024 on various fronts. The company reported EPS of $0.56 and revenue of $$3.87 billion, both beating Street consensus by $0.01 and $35.7 million, respectively. It expects that demand trends will vary across its businesses in 2024. To manage this, it is concentrating on reducing supply chain costs to enhance margins, drive earnings growth, and generate solid cash flow. In addition, the company is investing in growth initiatives to boost innovation and develop unique market strategies, aiming to capitalize on promising long-term opportunities.
On April 26, Stanley Black & Decker, Inc. (NYSE:SWK) declared a quarterly dividend of $0.81 per share, which was consistent with its previous dividend. In 2023, the company achieved its 57th consecutive annual dividend hike. Moreover, it has paid uninterrupted dividends to shareholders for the past 147 years, which makes SWK one of the best dividend aristocrat stocks on our list. The stock offers a dividend yield of 3.90%, as of June 25.
Stanley Black & Decker, Inc. (NYSE:SWK) was a part of 31 hedge fund portfolios at the end of Q1 2024, the same as in the previous quarter, as per Insider Monkey’s database. The stakes owned by these hedge funds have a collective value of over $715 million.
7. Chevron Corporation (NYSE:CVX)
Dividend Yield as of June 25: 4.10%
Chevron Corporation (NYSE:CVX) ranks seventh on our list of the best dividend aristocrat stocks. The American energy company manufactures and sells fuels, additives, petrochemicals, and lubricants. Oil companies are consistently favorable for dividend investors because they are known for paying hefty dividends to shareholders. Even when low oil prices impact their cash flow, they often take on debt and leverage assets to maintain their payouts. Chevron Corporation (NYSE:CVX) is also generous with its dividend payments, despite crude oil prices fluctuating within a narrow range over the past few months and remaining below their 2022 peak of $120. In the first quarter of 2024, the company reported $6.8 billion in operating cash flow and its cash flow for the quarter came in at $2.7 billion. During the quarter, it returned $6 billion to shareholders through dividends and share repurchases. This was the company’s eighth consecutive quarter of generating shareholder returns of over $5 billion.
As an integrated oil and gas company, Chevron Corporation (NYSE:CVX) manages both upstream and downstream operations. This integrated model is effective because it balances the fluctuations in oil and gas prices. When prices rise, the company’s upstream operations can see substantial gains. For example, it generated $30 billion in operating income in 2022 due to higher oil prices. The company utilized this windfall to boost stock buybacks, reduce debt, and pursue acquisitions.
Chevron Corporation (NYSE:CVX), one of the best dividend aristocrat stocks on our list, has been rewarding shareholders with growing dividends for the past 37 years. Moreover, it has paid regular dividends to shareholders since 1984. The company’s quarterly dividend comes in at $1.63 per share for a dividend yield of 4.10%, as of June 25.
Insider Monkey’s database of Q1 2024 showed that 62 hedge funds owned stakes in Chevron Corporation (NYSE:CVX), worth collectively over $23.2 billion. Warren Buffett’s Berkshire Hathaway owned the largest stake in the company, valued at over $19.3 billion. The hedge fund started investing in the company during the third quarter of 2020. Since this, the stock has surged by over 104%.
6. T. Rowe Price Group, Inc. (NASDAQ:TROW)
Dividend Yield as of June 25: 4.20%
T. Rowe Price Group, Inc. (NASDAQ:TROW) is an American asset management company that provides a wide range of advisory services to its consumers. In May, the company reported a growth in its assets under management (AUM) to $1.54 trillion, from $1.49 trillion as of April end. According to the management, favorable market conditions led to an increase in AUM. However, in the first quarter of 2024, the company reported net outflows of $8 billion, which were about half the level seen during the same period last year. The company said that while the outflows are expected to continue in the second half of 2024 as well, there is optimism for improvement this year due to higher sales and lower redemptions.
T. Rowe Price Group, Inc. (NASDAQ:TROW)’s business model presents both benefits and risks. As an asset manager, the company generates revenue by investing clients’ funds, with earnings fluctuating due to client inflows and outflows and market volatility. Hence, its earnings can be as unpredictable as the market itself. However, with no long-term debt on its balance sheet and a debt/equity ratio of just 0.03, the company has a significant financial cushion, ensuring dividend stability throughout the market cycles.
T. Rowe Price Group, Inc. (NASDAQ:TROW) offers a quarterly dividend of $1.24 per share and carries a dividend yield of 4.20%. The company has raised its payouts for 38 consecutive years, which makes TROW one of the best dividend aristocrat stocks on our list. In the most recent quarter, it returned $365 million to shareholders through dividends and share repurchases.
T. Rowe Price Group, Inc. (NASDAQ:TROW) was included in 24 hedge fund portfolios at the end of Q1 2024, according to Insider Monkey’s database. The stakes held by these hedge funds have a total value of over $938 million.
While we acknowledge the potential of TROW as an investment, our conviction lies in the belief that deeply undervalued dividend stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued dividend stock that is as promising as TROW but that trades at less than 7 times its earnings and yields nearly 10%, check out our report about the dirt cheap dividend stock.
5. Federal Realty Investment Trust (NYSE:FRT)
Dividend Yield as of June 25: 4.34%
Federal Realty Investment Trust (NYSE:FRT) ranks fifth on our list of the best dividend aristocrat stocks. The American real estate investment trust company mainly invests in shopping centers and other entertainment properties. The company follows a different business approach compared to its peers. Unlike some of its competitors who aim to amass large property portfolios, Federal Realty Investment Trust (NYSE:FRT) prioritizes quality over quantity. As of the end of March 2024, the company maintains ownership of only 102 properties. However, these properties are highly attractive. It strategically acquires properties in and around major metropolitan areas characterized by substantial population density and high incomes. This has several benefits for the company. For example, during the pandemic, while many properties faced occupancy challenges, it received inquiries from tenants seeking to relocate from nearby locations to secure space within its properties.
Federal Realty Investment Trust (NYSE:FRT)’s strong performance in early 2024 is highlighted by achieving its highest first-quarter leasing volume ever, with over 566,000 square feet of comparable retail space leased. Moreover, the company successfully finalized leases for approximately 190,000 square feet of office space at its premier mixed-use destinations during the quarter. This demand highlights the company’s position as a leader in the shopping center industry.
In addition to maintaining a strong portfolio, Federal Realty Investment Trust (NYSE:FRT) has established an impressive track record of dividends. The company offers a quarterly dividend of $1.09 per share and has boosted its payouts for 56 consecutive years. With a dividend yield of 4.34% as of June 25, FRT is one of the best dividend aristocrat stocks on our list.
As of the end of the March quarter of 2024, 22 hedge funds in Insider Monkey’s database owned stakes in Federal Realty Investment Trust (NYSE:FRT), which remained unchanged from the previous quarter. The consolidated value of these stakes is over $244 million.
4. Amcor plc (NYSE:AMCR)
Dividend Yield as of June 25: 5.02%
Amcor plc (NYSE:AMCR) is a global packaging company that specializes in a wide variety of related products for different industries. In its fiscal Q3 2024, the company reported net sales of over $3.4 billion, which showed a 7% decline from the same period last year. This decrease includes a 1% favorable impact from foreign exchange rate movements, offset by a 2% unfavorable impact due to lower raw material costs amounting to approximately $60 million being passed through. Its year-to-date net income of $710 million also fell by 12% YoY.
Amcor plc (NYSE:AMCR) managed to mitigate the decline in revenue and net income this year through strong free cash flow generation, which has been a source of satisfaction for income investors. In the first nine months of FY24, the company posted adjusted free cash flow of $115 million, up significantly from $14 million during the same period last year. This cash flow was in line with its expectations. The improvement in cash flow primarily reflects better performance in managing working capital. Management maintains its expectations that adjusted free cash flow will range between $850 million to $950 million for the fiscal year.
Amcor plc (NYSE:AMCR) currently offers a quarterly dividend of $0.125 per share. The company has raised its payouts for 40 consecutive years. The company remained committed to its shareholder return and distributed $570 million to investors through dividends and share repurchases year-to-date. With a dividend yield of 5.02% as of June 25, AMCR is one of the best dividend aristocrat stocks on our list.
As per Insider Monkey’s database of Q1 2024, 17 hedge funds owned stakes in Amcor plc (NYSE:AMCR), down from 21 in the preceding quarter. These stakes have a total value of over $65.6 million.
3. Franklin Resources, Inc. (NYSE:BEN)
Dividend Yield as of June 25: 5.41%
Franklin Resources, Inc. (NYSE:BEN) ranks third on our list of the best dividend aristocrat stocks with high yields. The American multinational asset management company reported growth in its assets under management (AUM) in May to $1.64 trillion, from $1.60 trillion in April. This figure also showed a growth from $1.4 trillion AUM reported during the same period last year. The company attributed this growth to positive market conditions. In addition to its AUM, the company also reported $6.9 billion in long-term net inflows, with its three largest alternative managers contributing a combined total of $1.4 billion in net inflows during fiscal Q2 2024.
Franklin Resources, Inc. (NYSE:BEN) strategically leverages acquisitions to expand its scale, thereby achieving cost efficiencies and broadening its customer base. In the most recent quarter, the company’s efforts to deepen client relationships and diversify its firm have yielded positive results, with contributions seen across asset classes, investment vehicles, and geographical regions. the acquisition of Putnam Investments in January enhanced the company’s investment capabilities significantly, marked by strong investment performance. This transaction also strengthened its presence in critical insurance and retirement channels, increasing its AUM in this segment to over $650 billion.
Franklin Resources, Inc. (NYSE:BEN) is one of the best dividend aristocrat stocks on our list with 48 consecutive years of dividend growth under its belt. The company currently pays a quarterly dividend of $0.31 per share and has a dividend yield of 5.41%, as reported on June 25.
The number of hedge funds tracked by Insider Monkey owning stakes in Franklin Resources, Inc. (NYSE:BEN) grew to 31 in Q1 2024, from 26 in the previous quarter. The consolidated value of these stakes is roughly $200 million. Among these hedge funds, Fairfax Financial Holdings was the company’s leading stakeholder, owning 1 million BEN shares.
2. Realty Income Corporation (NYSE:O)
Dividend Yield as of June 25: 5.91%
Also known as the monthly dividend company, Realty Income Corporation (NYSE:O) stands second on our list of the best dividend aristocrat stocks. On June 11, the real estate investment trust company raised its monthly dividend by 0.2% to $0.263 per share. This was the company’s 125th consecutive monthly dividend hike since being listed on NYSE in 1994. As of June 25, the stock has a dividend yield of 5.91%.
The stability of Realty Income Corporation (NYSE:O)’s high-quality portfolio continues to support the health of its balance sheet. In the first quarter of 2024, the company’s occupancy remained steady at 98.6%. It achieved a rent capture rate of 104.3% on re-leased properties and generated a same-store rental revenue growth of 0.8%. Along with the steady occupancy rate, the company’s portfolio consists of single-tenant, net-leased properties, which mainly reduces its financial burden. The tenants are high-profile, stable businesses, including Wynn Resorts, Dollar General, and FedEx, ensuring a stable revenue stream.
In the first quarter of 2024, Realty Income Corporation (NYSE:O) reported revenue of $1.2 billion, which showed a 33.4% growth from the same period last year. The company’s cash position also remained strong, which can also be seen through its very strong dividend history. In Q1, its operating cash flow came in at $778.6 million, up from $731.2 million in the prior-year period. The company’s adjusted free cash flow jumped to over $206 million, from $141.4 million in Q1 2023. It is also a reliable option from a dividend point of view because being an REIT, the company is expected to return 90% of its net income to shareholders through dividends in order to avoid paying income tax on its operational profits.
As per Insider Monkey’s database of Q1 2024, 25 hedge funds held stakes in Realty Income Corporation (NYSE:O), compared with 27 in the previous quarter. These stakes are worth over $250.5 million in total. With over 1.4 million shares, AEW Capital Management was the company’s leading stakeholder in Q1.
1. Altria Group, Inc. (NYSE:MO)
Dividend Yield as of June 25: 8.42%
Altria Group, Inc. (NYSE:MO) is a Virginia-based manufacturing company that specializes in the production of tobacco, cigarettes, and other nicotine products. Recently, the FDA approved the marketing of four of the company’s e-cigarette products after a thorough scientific review. This move is notable as it is the first time the agency has granted marketing orders for non-tobacco flavored vapor products through the premarket tobacco application process. The FDA stated that evidence from Altria showed these menthol-flavored products offer a significant benefit for adult smokers, encouraging complete switching from traditional cigarettes, which outweighs the risks, including the appeal to youth.
The tobacco habit among people has given the industry a golden ticket to steady profits. Despite the long-term drop in smoking rates in the US, the industry’s pricing power has kept the cash rolling in for years. Altria Group, Inc. (NYSE:MO) owns Marlboro, the top cigarette brand in the nation, commanding about 42% of the total retail market and a dominating 60% share of the premium segment. The company’s overall revenue for the first quarter of 2024 came in at $4.7 billion, which slightly fell by 0.9% from the same period last year.
Andvari Associates has given strong outlook for Altria Group, Inc. (NYSE:MO) in its first quarter 2024 investor letter. Here is what the firm has to say:
“Our second example of a high-yielding security is the stock of Altria Group, Inc. (NYSE:MO). Before we get into the details of why we started a position in Altria, a brief history is in order. The company was formerly known as Philip Morris before rebranding to Altria in 2003. Cynically, the rebranding was to minimize the negative attention from its tobacco business. However, the company also owned Kraft Foods and Miller Brewing, so it was logical to reflect its status as a conglomerate. Since rebranding, Altria has slowly “de-conglomerated”. It spun out Kraft in 2007. It spun out Philip Morris International in 2008. In 2021, it sold its Ste. Michelle Wine Estates business. Finally, last month Altria announced it is selling part of its 10% ownership in Anheuser-Busch InBev (BUD)
Andvari has followed Altria since we began our investment career. Profitability is extraordinary and the business requires minimal capital expenditures. Despite the volume of cigarettes having steadily declined—a great thing for our population health—Altria has still managed to grow revenues and profits with regular price increases…” (Click here to read the full text)
Altria Group, Inc. (NYSE:MO) currently offers a quarterly dividend of $0.98 per share. The company holds a 54-year streak of consistent dividend growth. With a dividend yield of 8.42% as of June 25, MO ranks first on our list of the best dividend aristocrat stocks.
Insider Monkey’s database of Q1 2024 indicated that 38 hedge funds owned stakes in Altria Group, Inc. (NYSE:MO), compared with 42 in the previous quarter. These stakes are collectively valued at over $823.3 million. Among these hedge funds, Harris Associates was the company’s leading stakeholder in Q1.
While we acknowledge the potential of MO as an investment, our conviction lies in the belief that some deeply undervalued dividend stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued dividend stock that is more promising than MO but that trades at less than 7 times its earnings and yields nearly 10%, check out our report about the dirt cheap dividend stock.
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Disclosure: None. This article is originally published at Insider Monkey.
