We recently compiled a list of the Dividend Contenders List: Top 15. In this article, we are going to take a look at where U.S. Bancorp (NYSE:USB) stands against the other dividend contenders.
Dividend stocks have long been favored by investors for the income they generate, and they become even more appealing when dividends increase over time. Investors frequently seek out companies with a strong history of raising their dividends, as this growth boosts their income over the long term. Sustaining long-term dividend growth is challenging. For instance, “dividend aristocrats” are companies that have grown their dividends consistently for at least 25 years, and only about 68 US companies have been successful in achieving this. This demonstrates how difficult it is to attain such a high standard. However, many companies still manage to build shorter dividend growth histories, showcasing their resilience and potential to reach even greater milestones over time. Dividend contenders are well-regarded for having raised their dividends for 10 straight years, though they have yet to reach the 25-year mark needed to be considered long-term dividend growers.
Investors are drawn to dividend growth stocks, as these stocks have shown strong performance over the years. Data from Ned Davis Research covering the past 50 years revealed that high-quality companies that initiate and increase dividends have delivered higher returns and lower volatility than an equal-weighted index. By holding a portfolio of dividend growth stocks, investors can potentially achieve not only favorable risk-adjusted returns but also a more stable investment experience—one less impacted by the risks of market timing, which can reduce long-term gains. This strategy can help investors build wealth steadily over time, contributing to a more secure financial future.
Recently, tech stocks have surged to the forefront, and investors are capitalizing on this momentum, temporarily overshadowing dividend stocks. However, this shift doesn’t imply a dim outlook for dividend stocks. Over the long term, dividend growth stocks have consistently demonstrated their strength and reliability. According to a report by Nuveen, companies that consistently grow or start paying dividends have delivered higher annualized returns with less volatility compared to other parts of the equity market. Although these dividend growth stocks don’t outperform in every market condition, their solid risk-adjusted returns over extended periods make them a strong foundation for an equity portfolio.
Also read: Dividend Champions List: Top 15
Michael Clarfeld, manager of the Dividend Strategy portfolios at ClearBridge Investments, supports investing in dividend stocks. Clarfeld emphasizes the value of long-term compounding, viewing dividend stocks as essential for a well-rounded portfolio. He advocates for a dividend growth approach, focusing on companies capable of steadily increasing their dividends over time. Instead of chasing high yields for immediate gains, he advises investors to consider total return, which includes the reinvestment of dividends. In an interview with Morningstar, he noted that the average company in his portfolios has compounded dividends at around 9% annually, meaning an investor’s income could potentially double every eight years. Clarfeld further said that dividend investing centers on evaluating a company’s cash flows and how they allocate payouts to investors.
In this dividend contenders list, we will take a look at companies that have raised their payouts for at least 10 consecutive years.
Our Methodology:
This list focuses on dividend contenders—companies known for raising their dividends consistently for 10 years but less than 25. From this group, we selected those with the highest dividend yields as of November 11, ranked from lowest to highest yield.
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).
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U.S. Bancorp (NYSE:USB)
Dividend Yield as of November 11: 3.91%
U.S. Bancorp (NYSE:USB) is an American bank holding company that provides a wide range of related services of its consumers. The bank formed a strategic partnership aimed at addressing the banking needs of Edward Jones’ clients with top U.S. Bank deposit and credit card solutions. Through this collaboration, Edward Jones financial advisors will gain the resources and options to offer co-branded U.S. Bank deposit and credit card products to their US clients, starting in late 2025.
U.S. Bancorp (NYSE:USB) reported mixed earnings in the third quarter of 2024. The company’s revenue of $6.83 billion fell by 2.4% on a YoY basis. The revenue also missed analysts’ expectations by $72.3 million. That said, it expects continued positive operating leverage growth in the fourth quarter and into 2025. Net interest income and margins have risen compared to the previous quarter, supported by an improved loan mix, ongoing repricing of fixed-rate earning assets, and careful management of liabilities.
In addition, credit quality outcomes aligned with expectations, and U.S. Bancorp (NYSE:USB) strengthened its capital position, closing the quarter with a CET1 capital ratio of 10.5%. They remain focused on balancing capital growth through earnings accretion with capital distributions and anticipate resuming share buybacks in the near future.
U.S. Bancorp (NYSE:USB) declared a 2.2% hike in its quarterly dividend at $0.50 per share on September 12. This was the company’s 14th consecutive year of dividend growth. In the past five years, it has grown its dividends at an annual average rate of 5.19%. With a dividend yield of 3.9%, USB is one of the best stocks on our dividend contenders list.
Overall USB ranks 12th on our list of the top dividend contenders. While we acknowledge the potential of USB 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 timeframe. If you are looking for an AI stock that is more promising than USB 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.
