We recently compiled a list of the 10 Top Performing Dividend Stocks in 2024. In this article, we are going to take a look at where Kinder Morgan, Inc. (NYSE:KMI) stands against the other top performing dividend stocks in 2024.
Over time, dividend stocks have shown consistent resilience in difficult market conditions. Despite the recent focus on AI, the long-term appeal of these stocks has grown. Income investors have noticed this shift, reflected in the increasing role of dividends in personal income. A report by S&P Dow Jones Indices reveals that the share of dividend income has risen from 2.68% in the fourth quarter of 1980 to 7.88% in the second quarter of 2024, emphasizing the importance of dividends as a key income source. The report also noted that since 1936, dividends have accounted for more than a third of total equity returns in the broader market, with the rest coming from capital gains.
The dividend growth strategy seems to be working for long-term investors as these stocks have generated strong returns over the years. Considering inflation, dividends have outpaced it, suggesting that investors should focus on these stocks. A report by Wisdom Tree highlighted that from 1957 to 2023, dividends grew at an average annual rate of 5.7%, which is over 2% higher than the inflation rate. The report also pointed out that dividends have only decreased in six years during the past 64 years, and only once by more than 5%. In comparison, stock prices fell in 18 of those years, with the worst decline exceeding 40% and an average drop of over 11%. Stock prices were more than twice as volatile as dividend cash flows, as short-term price movements are more influenced by market sentiment, while long-term value is driven by the stability of cash flows.
READ ALSO: 10 Dividend Stocks For Steady Income
This year, dividend stocks have underperformed compared to the broader market. The Dividend Aristocrat Index has gained only 6% year-to-date, while the market has surged by over 27%. Although this might seem discouraging for dividend investors, seasoned investors recognize that this presents a great opportunity to buy dividend stocks. Chris O’Keefe, a portfolio manager at Logan Capital Management, pointed out that the widening performance gap between the market and dividend stocks in 2024 creates an ideal time for investors to consider these equities. Along with O’Keefe, many analysts are encouraging investors to focus on dividend stocks due to their favorable outlook. The Dividend Aristocrats index has struggled to keep pace with the market since 2020. Dividend stocks saw a brief resurgence in 2022 as recession concerns led investors to seek out stable sectors like utilities and consumer goods, but the recovery was short-lived. By 2023, rising interest rates made bond and money-market returns more attractive than dividend yields, causing companies to adopt a more cautious stance and conserve cash amid economic uncertainty. This year, many of the top-performing stocks from the COVID era have once again driven the market to new highs.
Despite underperforming for the past two consecutive years, analysts remain optimistic about dividend stocks. They believe that dividend-paying equities could see a resurgence in 2025, as investors are increasingly seeking cash returns. The broader market’s dividend yield recently dropped to a 20-year low, falling below 1.19%, significantly lower than the long-term historical average of 4.3%. With interest rates rising on risk-free investments like Treasuries, companies are recognizing the growing competition for yield. As a result, many are responding by increasing dividends or introducing them for the first time. Notably, several major technology companies began paying dividends in 2024, signaling to the market that they are positioning themselves as value plays within a high-growth sector.
Aerial view of an oil and gas pipeline, spanning vast landscapes.
Our Methodology
For this article, we first used a stock screener to identify stocks that have reported positive returns in 2024 so far. From this selection, we chose dividend stocks with the highest year-to-date (YTD) as of December 25. The stocks were then arranged in ascending order of their YTD gains. 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).
Kinder Morgan, Inc. (NYSE:KMI)
Year-to-Date Return as of December 25: 53.2%
Kinder Morgan, Inc. (NYSE:KMI) is an American infrastructure company that owns and operates oil and gas pipelines and terminals. The company, through its Tennessee Gas Pipeline subsidiary, has announced plans to proceed with the Mississippi Crossing Project (MSX Project), targeting commercial operations by November 2028, pending necessary permits. The company intends to invest $1.4 billion in the project’s initial phase and is exploring the possibility of increasing capacity by an additional 0.4 billion cubic feet per day. This expansion would require further investment to enhance the pipeline’s horsepower for the added gas flow. The MSX Project aims to increase natural gas supplies to Southeast markets, addressing growing demand while reducing energy costs in the region.
Kinder Morgan, Inc. (NYSE:KMI) has delivered impressive returns in 2024, climbing over 53% year-to-date. This growth is largely driven by rising demand, which has maximized capacity utilization on existing pipelines and boosted contract renewal rates. The company is also reaping the rewards of high-yield expansion projects and its $1.8 billion acquisition of STX Midstream completed last year. KMI is one of the best performing dividend stocks in 2024.
Kinder Morgan, Inc. (NYSE:KMI) showcased solid financial performance in the third quarter of 2024, concluding the period with $108 million in cash and cash equivalents, an increase from $83 million at the close of December 2023. The company generated $1.2 billion in operating cash flow, while its free cash flow totaled $0.6 billion. On October 16, Kinder Morgan announced a quarterly dividend of $0.2875 per share, maintaining the same payout as the previous quarter. It holds a seven-year track record of consistent dividend growth. The stock’s dividend yield on December 25 came in at 4.21%.
Insider Monkey’s database of Q3 2024 indicated that 42 hedge funds held stakes in Kinder Morgan, Inc. (NYSE:KMI), up from 41 in the previous quarter. The total value of these stakes is nearly $1.3 billion. With over 18.2 million shares, Orbis Investment Management was the company’s leading stakeholder in Q3.
Overall, KMI ranks 7th on our list of the best performing dividend stocks in 2024. While we acknowledge the potential for KMI to grow, 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 KMI 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.
