We recently compiled a list of the 14 Best Large Cap Dividend Growth Stocks To Buy Now. In this article, we are going to take a look at where UnitedHealth Group Incorporated (NYSE:UNH) stands against the other large cap dividend growth stocks.

Investors continue to favor large-cap stocks, as these companies often serve as the foundation of popular index funds and are well-known among both seasoned professionals and casual traders. Moreover, large-cap firms have demonstrated their ability to withstand economic uncertainty, thanks to their strong market presence and substantial cash reserves, which help them weather financial downturns with relative ease. For the second consecutive year in 2024, US large-cap stocks outpaced cash, bonds, and international equities, securing the top spot in market performance.

Also read: 12 Best International Dividend Stocks To Buy Now

A Morningstar report revealed that over the 10-year period ending June 30, 2024, large-cap stocks have outperformed small-cap stocks by an average of more than 6 percentage points annually. This disparity stems from differences in sector exposure—small-cap benchmarks have a lower concentration of technology stocks and a greater presence in traditional industries like consumer cyclicals, financials, real estate, and industrials. Although economic growth has been robust, these sectors have struggled to match the pace set by technology-related stocks.

In addition, according to JPMorgan Wealth Management, large-cap stocks play a key role in driving long-term capital appreciation for investors. Over the 10-year period from 2013 to March 2023, large-cap stocks delivered a total return of 162%, outperforming mid-cap and small-cap stocks, which posted returns of 139% and 108%, respectively.

Large-cap stocks demonstrate their resilience through their ability to increase dividends even in times of market distress. Several leading companies have maintained decades-long streaks of dividend growth, weathering major economic crises such as the 2008 recession and the 2020 pandemic. A report by T. Rowe Price highlighted that large-cap firms with a track record of consistent dividend increases have shown relative strength during downturns, suffering smaller losses than the broader market. In addition, these companies have often outperformed during periods of market stagnation and have participated in a substantial share of gains during bull markets.

Dividend growth is a key factor when evaluating dividend stocks, as companies that consistently raise their payouts have historically outperformed those that do not. A report by RMB Capital found that between 1972 and 2018, companies that initiated or grew their dividends achieved an average annual return of 9.62%, significantly surpassing the 2.40% return of non-dividend-paying firms. Even the broader market, with a 7.30% return, lagged behind dividend growers. The report also emphasized that companies with a strong history of dividend increases have not only sustained but expanded their payouts, even during economic downturns. From a portfolio perspective, dividend growth stocks provide solid diversification, as they are spread across multiple industries. This offers an advantage over high-yield portfolios, which tend to be concentrated in mature sectors like utilities and, prior to 2007, financials.

Analysts recommend incorporating dividend stocks into income portfolios, especially as several major tech companies have adopted dividend policies this year. With robust cash flows, these firms are well-positioned to maintain and expand their dividend payouts over time. Given this, we will take a look at some of the best large-cap dividend growth stocks.

Our Methodology:

For this list, we first used a stock screener to identify large-cap dividend stocks with market capitalization above $10 billion. From that list, we shortlisted stocks that have 5-year average dividend growth rates of above 10%. The stocks are ranked in ascending order of their dividend growth rates.

At Insider Monkey, we are obsessed with hedge funds. 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).

UnitedHealth Group Incorporated (NYSE:UNH)

5-Year Average Annual Dividend Growth Rate: 14.59%

UnitedHealth Group Incorporated (NYSE:UNH) ranks seventh on our list of the best dividend stocks. The American health insurance company offers a wide range of related products and services to its consumers. The stock has surged modestly by just 1.9% in the past year. Analysts believe that the company may face a somewhat challenging operating environment next year, its strategic initiatives and pricing strategies are likely to drive growth. In addition, the company has effectively improved its operating cost ratio through strategic portfolio initiatives, which bodes well for future profitability. Its diversified portfolio also gives it a competitive edge in the market.

UnitedHealth Group Incorporated (NYSE:UNH) reported its fiscal year 2024 earnings, surpassing investor expectations with strong performance. It generated $400 billion in revenue, an 8% increase from the previous year, driven by growth across its diverse services. Operating earnings for the year were $32.3 billion, but after accounting for expenses related to a cyberattack and challenges in South America, adjusted operating earnings reached $34.4 billion.

UnitedHealth Group Incorporated (NYSE:UNH) delivered strong cash flow results that met investor expectations. The company generated $24.2 billion in operating cash flow for the year, 1.6 times its net income. Throughout 2024, it returned more than $16 billion to shareholders through dividends and share repurchases. In the fourth quarter, its return on equity reached 23.7%, showcasing robust earnings and effective capital management.

With a solid cash position, UnitedHealth Group Incorporated (NYSE:UNH) has established a strong dividend history. The company began paying annual dividends in 1990 and switched to quarterly payouts in 2010, consistently increasing its dividend ever since. The company offers a quarterly dividend of $2.10 per share and has a dividend yield of 1.59%, as of February 12.

Overall UNH ranks 7th on our list of the best large cap dividend growth stocks to buy. While we acknowledge the potential for UNH 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 UNH 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.