We recently compiled a list of the 10 Top Performing Dividend Stocks in 2024. In this article, we are going to take a look at where Garmin Ltd. (NYSE:GRMN) stands against the other top performing dividend stocks in 2024.
Over time, dividend stocks have shown consistent resilience in difficult market conditions. Despite the recent focus on AI, the long-term appeal of these stocks has grown. Income investors have noticed this shift, reflected in the increasing role of dividends in personal income. A report by S&P Dow Jones Indices reveals that the share of dividend income has risen from 2.68% in the fourth quarter of 1980 to 7.88% in the second quarter of 2024, emphasizing the importance of dividends as a key income source. The report also noted that since 1936, dividends have accounted for more than a third of total equity returns in the broader market, with the rest coming from capital gains.
The dividend growth strategy seems to be working for long-term investors as these stocks have generated strong returns over the years. Considering inflation, dividends have outpaced it, suggesting that investors should focus on these stocks. A report by Wisdom Tree highlighted that from 1957 to 2023, dividends grew at an average annual rate of 5.7%, which is over 2% higher than the inflation rate. The report also pointed out that dividends have only decreased in six years during the past 64 years, and only once by more than 5%. In comparison, stock prices fell in 18 of those years, with the worst decline exceeding 40% and an average drop of over 11%. Stock prices were more than twice as volatile as dividend cash flows, as short-term price movements are more influenced by market sentiment, while long-term value is driven by the stability of cash flows.
READ ALSO: 10 Dividend Stocks For Steady Income
This year, dividend stocks have underperformed compared to the broader market. The Dividend Aristocrat Index has gained only 6% year-to-date, while the market has surged by over 27%. Although this might seem discouraging for dividend investors, seasoned investors recognize that this presents a great opportunity to buy dividend stocks. Chris O’Keefe, a portfolio manager at Logan Capital Management, pointed out that the widening performance gap between the market and dividend stocks in 2024 creates an ideal time for investors to consider these equities. Along with O’Keefe, many analysts are encouraging investors to focus on dividend stocks due to their favorable outlook. The Dividend Aristocrats index has struggled to keep pace with the market since 2020. Dividend stocks saw a brief resurgence in 2022 as recession concerns led investors to seek out stable sectors like utilities and consumer goods, but the recovery was short-lived. By 2023, rising interest rates made bond and money-market returns more attractive than dividend yields, causing companies to adopt a more cautious stance and conserve cash amid economic uncertainty. This year, many of the top-performing stocks from the COVID era have once again driven the market to new highs.
Despite underperforming for the past two consecutive years, analysts remain optimistic about dividend stocks. They believe that dividend-paying equities could see a resurgence in 2025, as investors are increasingly seeking cash returns. The broader market’s dividend yield recently dropped to a 20-year low, falling below 1.19%, significantly lower than the long-term historical average of 4.3%. With interest rates rising on risk-free investments like Treasuries, companies are recognizing the growing competition for yield. As a result, many are responding by increasing dividends or introducing them for the first time. Notably, several major technology companies began paying dividends in 2024, signaling to the market that they are positioning themselves as value plays within a high-growth sector.
A marathon runner wearing a company branded smartwatch, monitoring his performance in real-time.
Our Methodology
For this article, we first used a stock screener to identify stocks that have reported positive returns in 2024 so far. From this selection, we chose dividend stocks with the highest year-to-date (YTD) as of December 25. The stocks were then arranged in ascending order of their YTD gains. 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).
Garmin Ltd. (NYSE:GRMN)
Year-to-Date Return as of December 25: 66.7%
Garmin Ltd. (NYSE:GRMN) is a multinational technology company. With over 35 years of history, the company is a recognized leader in integrating GPS technology into a wide range of consumer and commercial products. Initially focused on creating specialized instrumentation for aircraft cockpits, it achieved global success by expanding into automotive and marine navigation systems, as well as pioneering GPS-enabled wearables for health and fitness tracking. In recent years, Garmin has made significant strides with the growing trend among major automobile manufacturers to incorporate advanced infotainment systems that not only offer navigation but also include features like driver monitoring and augmented reality heads-up displays. The stock is up by nearly 67% in 2024, which makes it one of the best performing stocks in 2024.
In the third quarter of 2024, Garmin Ltd. (NYSE:GRMN) reported revenue of $1.6 billion, which showed a 24% growth from the same period last year. The revenue also beat analysts’ estimates by over $142 million. The company saw an increase in both gross and operating margins, reaching 60.0% and 27.6%, respectively. Operating income amounted to $437 million, reflecting a 62% year-over-year growth compared to the previous quarter.
Garmin Ltd. (NYSE:GRMN)’s cash position also came in strong in Q3 2024. The company generated $258 million in operating cash flow and its free cash flow came in at $219 million. The company also distributed a generous amount of $144 million to shareholders in dividends. It has been making regular dividend payments to shareholders for the past 22 years. The company currently pays a quarterly dividend of $0.75 per share and has a dividend yield of 1.42%, as of December 25.
According to Insider Monkey’s database of Q3 2024, 30 hedge funds held stakes in Garmin Ltd. (NYSE:GRMN), compared with 31 in the previous quarter. These stakes have a total value of over $785.3 million. With over 1.5 million shares, Select Equity Group was the company’s leading stakeholder in Q3.
Overall, GRMN ranks 4th on our list of the best performing dividend stocks in 2024. While we acknowledge the potential for GRMN 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 GRMN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article is originally published at Insider Monkey.
