In this article, we will take a look at some of the best dividend aristocrat stocks.
Investors usually buy stocks with the expectation that their value will increase as the company grows more profitable. However, stocks can offer additional advantages. As businesses succeed and mature, they often choose to distribute a portion of their profits to shareholders as cash dividends. Even more appealing are companies that not only pay dividends but consistently increase them year after year. These stocks have delivered impressive performance over time compared to other asset classes.
According to a report by Thornburg Investment Management, from 1990 to 2023, bond yields, represented by the Bloomberg U.S. Aggregate Bond Index, fell significantly from nearly 9% to 3.41%. Similarly, equity yields, reflected by the dividend payouts on the Dividend Aristocrats Index, declined from just over 3% to 2.42% during the same period. The Dividend Aristocrats Index tracks large-cap, blue-chip US companies within the broader market that have consistently increased their dividends for at least 25 consecutive years. The report further mentioned that dividend-paying stocks can not only offer a source of current income with the potential for growth over time but also help investors bring greater stability to their portfolios in the long run. The report cited Bloomberg’s data and highlighted that dividend aristocrats delivered an 11.63% return to shareholders between 1990 to 2023, compared with a 10.2% return for the broader market.
Excluding the aristocrat factor from dividend stocks highlights their significance in overall market returns. A report by S&P Dow Jones Indices reveals that since 1926, dividends have accounted for roughly 32% of the broader market’s total returns, with the remaining 68% coming from capital appreciation. This demonstrates that both steady dividend income and the potential for capital growth play crucial roles in shaping total return expectations. The report also highlighted the significant impact of compounding when it comes to dividends. Without dividends, the market’s return from January 1, 1930, to the end of July 2023 would have grown to 214%. However, if dividends had been reinvested during the same period, the return would have reached an impressive 7,219%.
Also read: 8 Magnificent Dividend Growth Stocks to Buy Now
The dividend aristocrat index has delivered a 12.5% return since the start of 2024, underperforming the broader market that has returned nearly 27%. Although dividend stocks have lagged in performance this year, companies continue to increase their payouts, reflecting investor preferences steadily. According to a recent report from S&P Dow Jones Indices, 480 dividend increases were recorded in Q3 2024, compared to 448 in Q3 2023, representing a 7.1% year-over-year growth. The total value of these increases for the quarter reached $14.1 billion. Over the past 12 months, dividend increases amounted to $74.7 billion, up from $63.9 billion in the previous year.
In view of this, we will take a look at some of the best dividend aristocrat stocks.
Photo by nathan dumlao on Unsplash
Our Methodology:
For this article, we first listed down all dividend aristocrat stocks — the companies with 25+ years of consecutive dividend increases. From that list, we picked 10 stocks with the highest number of hedge fund investors and ranked them in ascending order of hedge funds’ sentiment towards them, as per Insider Monkey’s Q3 2024 database.
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).
10. Chevron Corporation (NYSE:CVX)
Number of Hedge Fund Holders: 63
Chevron Corporation (NYSE:CVX) is an American multinational energy company that mainly specializes in oil and gas. Over the years, the company has become one of the largest energy businesses globally. It invests billions annually in expanding its operations, both through organic growth and acquisitions. These efforts not only drive business growth but also enhance its profitability and cash flow. Since the start of 2024, the stock has surged by nearly 8% and its 12-month return came in at roughly 12%.
In the third quarter of 2024, Chevron Corporation (NYSE:CVX) reported revenue of $50.67 billion, which, though, fell by over 6% from the same period last year, beat analysts’ estimates by $1.63 billion. The company increased its global production by 7% compared to the previous year, reaching nearly 3.4 million barrels of oil equivalent per day (BOE/d). This growth was driven by record production levels in the Permian Basin and the acquisition of PDC Energy.
As highlighted earlier, Chevron Corporation (NYSE:CVX) has steadily increased its cash flow over the years, which is encouraging news for income-focused investors. In the most recent quarter, the oil giant generated approximately $9.7 billion in operating cash flow, up from $6.3 billion in the previous quarter. This cash flow was enough to pay $7.7 billion to shareholders through dividends and share repurchases.
On November 1, Chevron Corporation (NYSE:CVX) declared a quarterly dividend of $1.63 per share, which was in line with its previous dividend. Overall, the company has raised its payouts for 37 consecutive years, which makes CVX one of the best dividend aristocrat stocks. The stock has a dividend yield of 4.04%, as of November 25.
At the end of Q3 2024, 63 hedge funds tracked by Insider Monkey held stakes in Chevron Corporation (NYSE:CVX), compared with 64 in the previous quarter. These stakes have a total value of over $21 billion. With nearly 119 million shares, Warren Buffett’s Berkshire Hathaway owned the largest stake in the company.
9. AbbVie Inc. (NYSE:ABBV)
Number of Hedge Fund Holders: 68
AbbVie Inc. (NYSE:ABBV) is an Illinois-based pharmaceutical company that offers a wide range of services and products to its shareholders. The stock has surged by over 11% since the start of 2024, reflecting investor confidence in how the company navigated Humira’s patent expiration. Once a blockbuster drug with peak sales of $21 billion in 2022, Humira experienced a sharp decline in revenue after losing patent protection last year. However, the company’s management successfully mitigated the impact, offsetting the drop in Humira’s sales, which had previously contributed to about one-third of the company’s total revenue.
AbbVie Inc. (NYSE:ABBV) reported revenue of $14.46 billion in the third quarter of 2024, which showed a 4% hike from the same period last year. The company’s Immunology Portfolio generated over $7 billion, up 4% from the prior-year period. In August, AbbVie purchased Cerevel Therapeutics, a neuroscience-focused drug company, for $8.7 billion in cash. Cerevel brought with it a pipeline of promising drug candidates, including emraclidine, a potential treatment for schizophrenia.
AbbVie Inc. (NYSE:ABBV) announced a 5.8% hike in its quarterly dividend to $1.64 per share on October 30. This marked the company’s 52nd consecutive year of dividend growth. Moreover, since its split with Abbott in 2013, the company’s dividend has grown by over 310%. With a dividend yield of 3.7%, as of November 25, ABBV is one of the best dividend aristocrat stocks on our list.
As of the close of Q3 2024, 68 hedge funds in Insider Monkey’s database owned stakes in AbbVie Inc. (NYSE:ABBV), up from 67 in the preceding quarter. These stakes are worth $2.6 billion in total.
8. The Procter & Gamble Company (NYSE:PG)
Number of Hedge Fund Holders: 68
The Procter & Gamble Company (NYSE:PG) ranks eighth on our list of the best dividend aristocrat stocks. The American multinational consumer goods company specializes in a wide range of related products and services. The stock has had an outstanding performance this year, reaching an all-time high of over $177 per share. This achievement is primarily due to the company’s strong execution. It has consistently delivered solid results, particularly during inflationary periods, by successfully implementing substantial price increases. For instance, in fiscal 2023, the company posted organic sales growth in every quarter. Since the start of 2024, PG is up by nearly 20%.
In fiscal Q1 2025, The Procter & Gamble Company (NYSE:PG) reported revenue of $21.7 billion, down 1% from the same period last year. The company’s operating cash flow for the quarter came in at $4.3 billion and adjusted free cash flow productivity was 82%, in line with expectations. It remained committed to its shareholder obligation, returning $4.4 billion to investors through dividends and share repurchases.
The Procter & Gamble Company (NYSE:PG)’s fiscal 2025 forecast is quite strong, projecting sales growth of 2% to 4% and a diluted net EPS increase of 10% to 12% compared to $6.02 in fiscal 2024. If the company hits the midpoint of this guidance, it will achieve a diluted EPS of $6.68 in fiscal 2025, marking an all-time high in earnings.
The Procter & Gamble Company (NYSE:PG) is a strong dividend payer, with 68 consecutive years of dividend growth under its belt. In addition, the company has never missed a dividend in 134 years. It currently offers a quarterly dividend of $1.0065 per share and has a dividend yield of 2.26%, as of November 25.
The number of hedge funds tracked by Insider Monkey owning stakes in The Procter & Gamble Company (NYSE:PG) grew to 68 in Q3 2024, from 64 in the previous quarter. These stakes have a consolidated value of more than $8.8 billion. Among these hedge funds, Fisher Asset Management was the company’s leading stakeholder in Q3.