We recently compiled a list of the 10 Best Dividend Aristocrats with Over 3% Yield. In this article, we are going to take a look at where Kenvue Inc. (NYSE:KVUE) stands against the other dividend stocks with over 3% yield.

When it comes to investing in stocks, high-growth companies often steal the spotlight. However, during uncertain times, dividend stocks—companies that regularly pay out quarterly dividends to shareholders—can serve as safe havens, helping to build wealth regardless of market conditions. Historically, dividends have played a significant role in stock market gains. Since 1930, dividends have contributed about 40% of the S&P 500’s total returns. When it comes to dividend stocks, companies that consistently increase their dividends hold special importance for investors. These companies provide shareholders with a steadily growing income.

One popular dividend strategy to invest in dividend growth stocks is dividend aristocrats, which are the companies that have raised their payouts for 25 consecutive years. Though the dividend aristocrats index is lagging this year, delivering a little over 5% return year-to-date, it has performed well in the long run, especially during market downturns. Phillip Brzenk, S&P’s global head of multi-asset indexes, studied the performance of dividend growth strategies, focusing on times when the market performed negatively. He discovered that since the end of 1989, there have been six years when the broader market experienced negative returns. In each of those years, the Dividend Aristocrats index outperformed the benchmark by an average of 13.28%. Notably, the Dividend Aristocrats even achieved a positive total return in three of those years.

Given the strong returns of dividend growth stocks, numerous companies are keen to enhance their dividends. In the second quarter of 2024, there were 539 dividend increases, a 17.2% rise from the 460 increases in the same quarter of 2023. The total dividend hikes amounted to $20.4 billion for the quarter, significantly up from $9.8 billion in Q2 2023, according to a report by S&P Dow Jones Indices. These dividend increases aren’t just a quick fix to attract investors; it’s supported by strong corporate balance sheets and increased cash flows. According to Janus Henderson, corporate cash flow remained solid across most sectors in 2023, providing ample resources for dividends and share buybacks. Consequently, global dividend growth increased by 5% for the year, following the long-term trend. The firm also gave an optimistic outlook for dividends in 2024, predicting $1.72 trillion in dividends for the year, marking a 3.9% increase on a headline basis, equivalent to a 5% growth rate.

Dividend aristocrat stocks are renowned for their growing income, but that doesn’t mean they lack solid yields. Many dividend aristocrats provide above-average yields along with decades of consistent dividend growth. This combination is particularly advantageous for income investors, as it offers the best of both worlds: robust yields and steady growth. Let’s now take a look at some of the best dividend aristocrat stocks with over 3% yield.

Our Methodology:

For this list, we looked at a group of 67 dividend aristocrat companies, which are known for raising dividends for 25 years or more. From this list, we chose 10 stocks with dividend yields above 3%, as of July 17, and arranged them in order from lowest to highest yield. We’ve also mentioned the hedge fund sentiment for each stock, which was sourced from Insider Monkey’s database of 920 funds as of Q1 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).

Kenvue Inc. (NYSE:KVUE)

Dividend Yield as of July 17: 4.30%

Kenvue Inc. (NYSE:KVUE) is a New Jersey-based consumer health company. Last year, the company completed its separation from Johnson & Johnson, marking its transition to a fully independent company. It’s a given that corporate breakups and restructurings often bring uncertainty, which has understandably affected both Kenvue and Johnson & Johnson’s recent stock performance. Despite these challenges, Kenvue has the potential to emerge as a strong high-yield dividend stock suitable for long-term investment.

That said, analysts are concerned that buying Kenvue Inc. (NYSE:KVUE) could result in the possibility of encountering sluggish growth, potentially resulting in a stagnant stock price. This scenario could undermine an investment strategy focused on dividend payouts, despite Kenvue’s strong brands facing competition in their respective markets. Since its separation from J&J in August 2023, the stock has declined by over 21%. However, it has a strong portfolio of leading brands such as Band-Aid, Tylenol, Listerine, Neutrogena, and Aveeno, among others. These products typically exhibit resilient performance, demonstrating stability regardless of economic conditions. Harris Associates also highlighted the potential of Kenvue Inc. (NYSE:KVUE) in its Q1 2024 investor letter. Here is what the firm has to say:

“Kenvue Inc. (NYSE:KVUE) became the largest standalone consumer health company following its split-off from Johnson & Johnson in May 2023. The company’s highly recognizable brands, such as Neutrogena, Listerine, Tylenol and Band-Aid, have been market share leaders in their respective categories for generations. However, Kenvue’s first year as a public company was clouded by litigation and market share losses in certain categories. As a result, Kenvue now trades for just 16.5x trailing earnings, a substantial discount to the market and other consumer health and packaged goods companies. We see an opportunity for the company to improve efficiency and re-invest the cost savings into increased product development and marketing, which should help improve its growth and brand equity.”

Kenvue Inc. (NYSE:KVUE) offers a quarterly dividend of $0.20 per share. As long as the company announces a dividend increase by the end of the year, it will maintain its status as a Dividend King, a title it inherited from J&J. For now, the company maintains a 62-year streak of consistent dividend growth, which makes KVUE one of the best dividend aristocrat stocks on our list. The stock sports a dividend yield of 4.30%, as recorded on July 17.

At the end of March 2024, 47 hedge funds in Insider Monkey’s database owned stakes in Kenvue Inc. (NYSE:KVUE), down from 64 in the preceding quarter. These stakes are collectively valued at over $1.3 billion. With nearly 18 million shares, Harris Associates was the company’s leading stakeholder in Q1.

Overall KVUE ranks 5th on our list of the best dividend aristocrats to buy. You can visit 10 Best Dividend Aristocrats with Over 3% Yield to see the other dividend aristocrats that are on hedge funds’ radar. While we acknowledge the potential of KVUE as an investment, our conviction lies in the belief that some deeply undervalued dividend stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued dividend stock that is more promising than KVUE but that trades at less than 7 times its earnings and yields nearly 10%, check out our report about the dirt cheap dividend stock.

READ NEXT: Analyst Sees a New $25 Billion “Opportunity” for NVIDIA and 10 Best of Breed Stocks to Buy For The Third Quarter of 2024 According to Bank of America.

Disclosure: None. This article is originally published at Insider Monkey.