We recently compiled a list of the 8 Best American Dividend Stocks To Buy Right Now. In this article, we are going to take a look at where NIKE, Inc. (NYSE:NKE) stands against the other American dividend stocks.
The US economy expanded by 2.8% in the third quarter of 2024, as reported in the Advance GDP release from the U.S. Bureau of Economic Analysis. This marked the ninth straight quarter of growth in real GDP. While the third-quarter increase was robust, it slightly lagged behind the 3% growth recorded in the second quarter of 2024. Economists polled by Dow Jones had anticipated a 3.1% rise.
Regardless of market conditions, investors frequently seek to minimize risk in their portfolios, and investing in dividend stocks is a reliable approach to achieve this. A report by S&P Dow Jones Indices highlighted the growing significance of dividends as a source of personal income. Over time, dividend income has steadily risen, increasing from 2.68% in the fourth quarter of 1980 to 7.88% in the second quarter of 2024. In contrast, interest income has seen a decline, dropping from 14.58% to 7.61% during the same period.
Also read: 8 Best Dividend Kings To Invest In For Safe Dividend Growth
The Dividend Aristocrat Index, which tracks the performance of companies with 25 consecutive years of dividend growth, has surged by over 10% since the start of 2024, underperforming the market. Although dividend stocks may not have been hitting it out of the park this year, US companies have remained dedicated to rewarding shareholders by consistently paying dividends. According to a report by S&P Dow Jones, for the 12-month period ending in September 2024, US common dividend increases totaled $74.7 billion, marking a 16.9% rise from the $63.9 billion recorded in the same period a year earlier, ending in September 2023. The report also mentioned that in the third quarter of 2024, there were 480 dividend increases reported, marking a 7.1% rise compared to the 448 increases in the same period in 2023. The total value of these dividend hikes amounted to $14.1 billion for the quarter.
WisdomTree offers an interesting perspective on global dividends in its report. According to their findings, the global equity market currently distributes around $1.6 trillion in dividends, an increase from approximately $1.5 trillion last year. Notably, 55% of these dividends come from outside the US, which is about 15% more than the non-US share in market cap-weighted indexes. On the other hand, US companies account for 44% of global dividends, which is considerably less than their 63% share of global market capitalization. This suggests that non-US markets are more heavily weighted in dividend-focused indexes, while US exposure is relatively lower. For instance, European countries make up about a quarter of global dividend payments, which is 10% more than their share of the global market cap.
That said, the start of dividend payments by several major US tech companies contributed an additional 1.1 percentage points to the global growth rate in Q2, as reported by Janus Henderson’s Global Dividend Index report. The report also mentioned that the contribution from these new dividend payers will persist throughout the remainder of the year, ensuring that US payout growth remains ahead of the global average. In view of this, let’s take a look at some of the best American dividend stocks.
Our Methodology:
We created this list by scanning Insider Monkey’s Q3 2024 database for US companies that have consistently increased their dividends for at least 10 years and are traded on American stock exchanges. Then, we chose stocks with dividend yields above 2% as of December 10. Finally, we selected the top 8 companies with the most hedge fund investors in Q3 2024 from the refined dataset.
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 team of trainers and athletes displaying a wide range of athletic and casual footwear.
NIKE, Inc. (NYSE:NKE)
Number of Hedge Fund Holders: 75
NIKE, Inc. (NYSE:NKE) ranks sixth on our list of the best dividend stocks. The multinational footwear and apparel company offers products for men, women, and children. The company has raised its payouts for 23 years in a row. Currently, it offers a quarterly dividend of $0.40 per share and has a dividend yield of 2.07%, as of December 10.
While NIKE, Inc. (NYSE:NKE) has built strong investor trust over time, the company has encountered challenges in recent years. To address these issues, it is implementing new strategies, including appointing a new CEO. This leadership change marks the return of Elliott Hill, a seasoned company veteran who retired in 2020 after serving as president of global commercial and marketing operations. With Hill’s extensive experience and track record of success, the company aims to revitalize its approach and navigate its path forward.
Mar Vista Investment Partners, LLC also highlighted NIKE, Inc. (NYSE:NKE)’s strength in its Q3 2024 investor letter. Here is what the firm has to say:
“We exited our NIKE, Inc. (NYSE:NKE) investment following an 18% stock price recovery from recent lows. This decision was prompted by Nike’s revised fiscal year 2025 forecast, which projects negative mid-single-digit revenue growth. The company faces a significant slowdown in lifestyle product sales, expected to persist for at least another year. Our analysis indicates sales and earnings will likely fall 15-20% below management’s previous conservative estimates. This downward revision stems from insufficient product innovation, wholesale channel shifts, and intentional supply reduction in lifestyle franchises. While reduced guidance and new leadership might provide a catalyst for the stock’s performance, the path to fundamental improvement is still unclear.
Despite maintaining its position as the global sportswear leader, Nike’s intrinsic value has stagnated. The company’s efforts to reinvigorate innovation and re-engage with wholesale channels may eventually yield growth, but our skepticism regarding management’s execution has increased. We believe Nike needs to reset investors’ expectations on margins and profits while revitalizing its top-line prospects. A short-term profit sacrifice, though painful, could provide the necessary reset to achieve financial expectations in future years. We will continue monitoring Nike’s turnaround and reassess the investment if fundamentals and management execution improve.”
In fiscal Q1 2025, NIKE, Inc. (NYSE:NKE) reported revenue of $11.6 billion, which fell by 10% from the same period last year. The company experienced an 8% year-over-year decline in wholesale revenue, totaling $6.4 billion. Despite this, its cash position remained strong, with cash and cash equivalents increasing to $8.5 billion from $6.2 billion in the same period last year. Over the trailing twelve months, the company generated $7.9 billion in operating cash flow.
NIKE, Inc. (NYSE:NKE) was a popular buy among elite funds at the end of Q3 2024, as hedge fund positions in the company grew to 75, from 66 in the previous quarter. The stakes owned by these hedge funds have a collective value of over $5 billion. With over 16.2 million shares, Pershing Square was the company’s leading stakeholder in Q3.
Overall NKE ranks 6th on our list of the best American dividend stocks to buy right now. While we acknowledge the potential for NKE 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 time frame. If you are looking for an AI stock that is more promising than NKE 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.
