In this article, we discuss the 10 safe dividend stocks to consider for retirement. If you want to skip our detailed analysis of these stocks, go directly to Retirement Stock Portfolio: 5 Safe Dividend Stocks To Consider.
Astronomical valuations in the growth sector and the onset of the COVID-19 pandemic pushed dividend stocks to new lows last year. This sentiment has more or less remained constant even though inflation fears are dogging the marketplace and several experts have forecast that interest rates will rise soon, hurting growth rallies. However, there is more to dividend stocks than meets the eye. Data from the S&P Dow Jones Indices indicates that dividend income made up over 33% of the monthly total return of the S&P between 1996 and 2015.
In addition to steady monthly income, there are several other benefits to dividend stocks as well. For example, dividend stocks often experience less volatility than their growth counterparts, primarily because of the nature of their business. Over the long term, dividend stocks often outperform growth equities. According to research by Eugene Fama and Kenneth French, dividend payers have outperformed non-payers by close to 2 percentage points between 1927 and 2014 – dividend payers averaged 10.4% growth during the period against 8.5% for others.
Investors who want to shield their portfolios from some of the risks associated with growth stocks but also want capital gains in the process should check out some safe options in the dividend sector by following the smart money. Some of the top dividend stocks to buy according to hedge funds include Lowe’s Companies, Inc. (NYSE:LOW), Johnson & Johnson (NYSE:JNJ), The Procter & Gamble Company (NYSE:PG), The Coca-Cola Company (NYSE:KO), and Parker-Hannifin Corporation (NYSE:PH), among others discussed in detail below.
Our Methodology
With this context in mind, here is our list of the 10 safe dividend stocks to consider for retirement. The forward dividend yield and consecutive years of dividend growth for each stock are mentioned alongside other details for further clarity.
The list is compiled according to the number of hedge funds having stakes in each company. Data from the 873 funds tracked by Insider Monkey was used for this purpose.
Why pay attention to hedge fund holdings? Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 86 percentage points since March 2017. Between March 2017 and July 2021 our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by more than 86 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Retirement Stock Portfolio: Safe Dividend Stocks To Consider
10. Farmers & Merchants Bancorp, Inc. (NASDAQ:FMAO)
Number of Hedge Fund Holders: N/A
Consecutive Years of Dividend Growth: 56
Forward Dividend Yield: 2.99%
Farmers & Merchants Bancorp, Inc. (NASDAQ:FMAO) is among a rare breed of stocks that perform consistently well but have valuations that test the patience of investors. The company recently declared a quarterly dividend of $0.18 per share, an increase of close to 6% from the previous dividend of $0.17 per share. The firm also beat market estimates on revenue in the second quarter by $3.3 million. The earnings per share over the period was $0.44.
Farmers & Merchants Bancorp, Inc. (NASDAQ:FMAO) announced earlier this month that it had completed the acquisition of Perpetual Federal Savings Bank. The latter will fully transition into the new firm by October 18. With the purchase, the assets of the former are above $2.6 billion.
Farmers & Merchants Bancorp, Inc. (NASDAQ:FMAO) has 31 offices across Ohio and Indiana. The firm has a market cap of $311 million and posted $69 million in revenue last year.
Just like Lowe’s Companies, Inc. (NYSE:LOW), Johnson & Johnson (NYSE:JNJ), The Procter & Gamble Company (NYSE:PG), The Coca-Cola Company (NYSE:KO), and Parker-Hannifin Corporation (NYSE:PH), Farmers & Merchants Bancorp, Inc. (NASDAQ:FMAO) is one of the safe dividend stocks to consider for retirement.
9. American States Water Company (NYSE:AWR)
Number of Hedge Fund Holders: 14
Consecutive Years of Dividend Growth: 66
Forward Dividend Yield: 1.61%
American States Water Company (NYSE:AWR) is a water utility company with solid fundamentals. In the second quarter, it beat market estimates on earnings per share and revenue. In late July, the company declared a quarterly dividend of $0.365 per share, an increase of 9% from the previous dividend of $0.335 per share. In addition to water utility, the firm also has stakes in the electricity and industrial businesses.
Analysts are also bullish on the stock. In early August, Wells Fargo analyst Jonathan Reeder maintained an Overweight rating on American States Water Company (NYSE:AWR) stock and raised the price target to $98 from $87.
At the end of the second quarter of 2021, 14 hedge funds in the database of Insider Monkey held stakes worth $47 million in American States Water Company (NYSE:AWR), the same as in the preceding quarter worth $38 million.
Out of the hedge funds being tracked by Insider Monkey, New York-based firm Millennium Management is a leading shareholder in Northwest Natural Holding Company (NYSE:NWN) with 207,634 shares worth more than $16 million.
In addition to Lowe’s Companies, Inc. (NYSE:LOW), Johnson & Johnson (NYSE:JNJ), The Procter & Gamble Company (NYSE:PG), The Coca-Cola Company (NYSE:KO), and Parker-Hannifin Corporation (NYSE:PH), American States Water Company (NYSE:AWR) is one of the safe dividend stocks to consider for retirement.
8. Commerce Bancshares, Inc. (NASDAQ:CBSH)
Number of Hedge Fund Holders: 16
Consecutive Years of Dividend Growth: 53
Forward Dividend Yield: 1.47%
There is positive hedge fund sentiment around Commerce Bancshares, Inc. (NASDAQ:CBSH). According to the latest filings, 16 hedge funds in the database of Insider Monkey have stakes worth $75 million in the company. This compares favorably to the filings at the end of March, when 13 funds held stake in the firm worth $73 million.
Connecticut-based firm AQR Capital Management is a leading shareholder in Northwest Natural Holding Company (NYSE:NWN) with 415,487 shares worth more than $30 million.
The earnings of the firm in the second quarter also make for good reading. Between March and June this year, Commerce Bancshares, Inc. (NASDAQ:CBSH) earned a revenue of $347 million, up more than 8% year-on-year. The earnings per share over the period were $1.38, beating market predictions by $0.36.
Alongside Lowe’s Companies, Inc. (NYSE:LOW), Johnson & Johnson (NYSE:JNJ), The Procter & Gamble Company (NYSE:PG), The Coca-Cola Company (NYSE:KO), and Parker-Hannifin Corporation (NYSE:PH), Commerce Bancshares, Inc. (NASDAQ:CBSH) is one of the safe dividend stocks to consider for retirement.
7. Lancaster Colony Corporation (NASDAQ:LANC)
Number of Hedge Fund Holders: 18
Consecutive Years of Dividend Growth: 59
Forward Dividend Yield: 1.74%
Lancaster Colony Corporation (NASDAQ:LANC) makes and sells packaged foods and meat products. Even though the firm is rated highly amongst hedge funds due to an impressive dividend history stretching back over five decades, it has had a mixed year so far. It narrowly missed market expectations on earnings per share in the fourth fiscal quarter but beat revenue estimates by $17 million.
However, dividend payouts have continued despite the minor setbacks. In August, Lancaster Colony Corporation (NASDAQ:LANC) declared a quarterly dividend of $0.75 per share, in line with previous.
At the end of the second quarter of 2021, 18 hedge funds in the database of Insider Monkey held stakes worth $294 million in Lancaster Colony Corporation (NASDAQ:LANC), down from 22 the preceding quarter worth $246 million.
Out of the hedge funds being tracked by Insider Monkey, New York-based firm Renaissance Technologies is a leading shareholder in Northwest Natural Holding Company (NYSE:NWN) with 394,963 shares worth more than $76 million.
Lowe’s Companies, Inc. (NYSE:LOW), Johnson & Johnson (NYSE:JNJ), The Procter & Gamble Company (NYSE:PG), The Coca-Cola Company (NYSE:KO), and Parker-Hannifin Corporation (NYSE:PH) are some of the safe dividend stocks to consider for retirement, just like Lancaster Colony Corporation (NASDAQ:LANC).
6. Northwest Natural Holding Company (NYSE:NWN)
Number of Hedge Fund Holders: 11
Consecutive Years of Dividend Growth: 65
Forward Dividend Yield: 4.05%
Northwest Natural Holding Company (NYSE:NWN) is another hedge fund favorite in the dividend domain with strong fundamentals. The company beat market estimates on earnings per share and revenue in the second quarter, reaffirming guidance numbers. The company primarily operates as a gas utility firm. Last week, it declared a quarterly dividend of $0.4825 per share, an increase from the previous dividend of $0.4800 per share.
Wells Fargo analyst Sarah Akers gave Northwest Natural Holding Company (NYSE:NWN) stock an Equal Weight rating with a price target of $58 in May, up from $49 earlier. Akers cited higher peer group multiples as one of the reasons behind the upgrade.
Out of the hedge funds being tracked by Insider Monkey, Chicago-based firm Citadel Investment Group is a leading shareholder in Northwest Natural Holding Company (NYSE:NWN) with 102,471 shares worth more than $5.3 million.
At the end of the second quarter of 2021, 11 hedge funds in the database of Insider Monkey held stakes worth $14 million in American States Water Company (NYSE:AWR), up from 10 in the preceding quarter worth $28 million.
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Disclosure. None. Retirement Stock Portfolio: 10 Safe Dividend Stocks To Consider is originally published on Insider Monkey.
