We recently compiled a list of the 10 Dividend Stocks For Steady Income. In this article, we are going to take a look at where QUALCOMM Incorporated (NASDAQ:QCOM) stands against the other dividend stocks.

Generating income has consistently been a primary goal for investors. To achieve this, they often opt for investments that provide steady and reliable returns over time. Dividend stocks are particularly popular in this regard, as they are well-regarded for offering regular income. Although using cash payouts from a stock portfolio is a popular approach among individuals nearing retirement, building an equity income portfolio is an option available to anyone. Over the years, dividends have significantly enhanced investors’ overall returns, making these stocks a compelling choice for income-focused portfolios. In certain periods, especially when equity returns fell below 10%, dividends have accounted for more than half of the total returns of major market indices, according to LSEG data.

Investors are increasingly emphasizing the quality of a company’s earnings. Examining factors such as dividends per share, dividend growth, and the stability of dividend payments can provide valuable insights into a company’s financial stability. Those who prioritize businesses with lower debt levels and higher profitability often target well-established, financially robust firms with greater flexibility. These high-quality companies typically demonstrate stronger resilience during market downturns and are more likely to sustain earnings growth across different market conditions.

Also read: 8 Best Dividend Leaders to Buy According to Wall Street Analysts

According to a report by BlackRock, historically, stocks that consistently grew or maintained their dividends have delivered better performance compared to those that either did not pay dividends or reduced their payouts. During market downturns, dividend-paying stocks often provide a buffer against the volatility of share prices. Companies that issue dividends typically strive to maintain these payments and are generally reluctant to reduce them unless absolutely unavoidable.

When investing in dividend stocks, investors often evaluate the dividend yield. Experts recommend focusing on yields within the 3% to 6% range, as higher yields may indicate potential yield traps. Brian Bollinger, president of Simply Safe Dividends, has also emphasized this point. Here are some comments from the analyst:

“I generally like to advocate for an approach of targeting great businesses that might pay closer to a 3% to 4% dividend yield.”

He further mentioned that these companies tend to gradually increase their payouts, which can enhance annual income streams and help counter the impact of inflation. Regarding companies with lower yields, he noted that they are often associated with more secure businesses and more reliable dividend payments. For example, the Dividend Aristocrat Index, which monitors companies with at least 25 years of consistent dividend growth, has an indicated yield of 2.28%. According to Bollinger, many of the firms in this index are well-established and financially stable. He suggested that creating a diversified portfolio of these companies can provide reassurance, as it builds a solid foundation for a growing stream of passive income, regardless of market fluctuations. He further said:

“When stock prices fall, it’s so easy to panic, but dividend investing can overcome that because you’re just trying to stay focused on your income stream. You don’t care so much about the markets’ short-term ups and downs anymore.”

As a result, investors often include dividend stocks in their portfolios.

Our Methodology:

For this list, we first filtered dividend stocks that have shown at least 10 consecutive years of dividend growth. From this group, we selected those with dividend yields above 1.5% as of December 20. Lastly, we chose 10 companies that have achieved a share price return of over 30% over the past five years. The stocks are ranked in ascending order of their dividend yields as of December 20. 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).

QUALCOMM Incorporated (NASDAQ:QCOM)

Dividend Yield as of December 20: 2.24%

5-Year Share Price Return: 70.9%

QUALCOMM Incorporated (NASDAQ:QCOM) is a California-best semiconductor company that also offers services in wireless technology. The company has established a solid presence in the smartphone chip industry and stands to gain from the rapidly expanding generative AI smartphone market. IDC projects this segment to grow at an annual rate of 78% through 2028, with yearly shipments anticipated to reach 912 million units by the end of the forecast period. In addition, the company ranks as the second-largest player in the smartphone application processor market, holding a 31% market share, according to Counterpoint Research. The stock has surged by nearly 71% in the past five years.

In fiscal Q4 2024, QUALCOMM Incorporated (NASDAQ:QCOM) delivered robust earnings, reporting revenues of $10.24 billion, an 18% increase compared to the same quarter last year. Net income saw a year-over-year rise of 33%, reaching $3.5 billion. Moreover, the company achieved annual earnings per share growth of over 30% for fiscal 2024.

Madison Investments highlighted QCOM in its Q3 2024 investor letter. Here is what the firm has to say:

“Alphabet Inc., Eli Lilly and Company, QUALCOMM Incorporated (NASDAQ:QCOM), Microsoft Corporation, and Apple Inc. were the largest detractors. Qualcomm has given back some of its first half gains after the CFO commented at a conference that its entrance into the AI PC business would take time to ramp. We continue to see Qualcomm as well positioned with growth from AI moving into the mobile phone, from new opportunities in the Internet of Things (IoT), and within the Auto industry but will also look to future growth as they enter the PC market.”

QUALCOMM Incorporated (NASDAQ:QCOM) maintains a strong cash position to sustain its dividend payments. By the end of the quarter, the company held $8 billion in cash and cash equivalents. Its operating cash flow increased to $12.2 billion, up from $11.3 billion in the same period last year. During the quarter, QUALCOMM returned $2.2 billion to shareholders through dividends and share buybacks. It is one of the best stocks for steady income as the company has raised its payouts for 20 consecutive years. The company offers a quarterly dividend of $0.85 per share and has a dividend yield of 2.24%, as recorded on December 20.

QUALCOMM Incorporated (NASDAQ:QCOM) was included in 74 hedge fund portfolios at the end of Q3 2024, as per Insider Monkey’s database. The stakes held by these funds have a consolidated value of more than $3.23 billion. With over 2 million shares, Two Sigma Advisors was the company’s leading stakeholder in Q3.

Overall QCOM ranks 8th on our list of the best stocks with steady dividends. While we acknowledge the potential of QCOM 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 QCOM 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.