In this article, we discuss 10 best high-yield dividend champions to buy in August.
The current market situation and soaring inflation have investors worried about a possible recession. That’s why they are flocking to dividend stocks. In CNBC’s June survey, nearly 42% of the respondents said that they would likely invest in dividend-paying stocks for the rest of the year.
Daniel Peris, a manager at Federated Hermes Strategic Value Dividend Fund, said that in the current environment his fund would focus on companies that pay dividends, maintain track records of dividend growth, and have strong fundamentals for further growth in payouts. He further emphasized that investors show more confidence in stocks that present attractive dividend yields and have good balance sheets. Some of the most popular dividend stocks that fall in this category are The Procter & Gamble Company (NYSE:PG), PepsiCo, Inc. (NASDAQ:PEP), and Johnson & Johnson (NYSE:JNJ). These companies have been providing passive income to shareholders for decades now.
In 2022, the annual dividend rate reached its record high at $550 billion for the first time, according to a report by S&P Dow Jones Indices. Based on this growth, analysts are of the view that dividend payments are expected to jump over 10% at the end of the year, from last year’s $511.2 billion. In this context, we will discuss some high-yield dividend champions to buy in August.
Photo by Annie Spratt on Unsplash
Our Methodology:
We selected companies that have consistently raised their dividends for more than 25 years. The stocks mentioned below have yields of over 4% and are ranked from the lowest yield to the highest. In addition to this, we also considered hedge fund sentiment around each stock, based on Insider Monkey’s Q1 2022 database of 900+ elite funds.
Best High-Yield Dividend Champions to Buy in August
10. Realty Income Corporation (NYSE:O)
Dividend Yield as of August 1: 4.03%
Realty Income Corporation (NYSE:O) is an American real estate investment trust company that came to prominence because of its monthly dividend policy.
In Q1 2022, Realty Income Corporation (NYSE:O) reported strong free cash flow generation at $513.4 million, up from $352 million in the previous quarter. The company paid $438 million in dividends during the quarter, which takes its payout ratio to 75.6%. Realty Income Corporation (NYSE:O) has a long 28-year history of dividend growth and has paid dividends consecutively for 53 years. It currently offers a monthly dividend of $0.2475 per share, with a yield of 4.03%, as of August 1.
This June, Credit Suisse initiated its coverage of Realty Income Corporation (NYSE:O) with an Outperform rating and a $75 price target.
At the end of Q1 2022, 22 hedge funds in Insider Monkey’s database owned stakes in Realty Income Corporation (NYSE:O), down from 30 in the previous quarter. These stakes are collectively valued at $284.8 million. With over 1.8 million shares, Glendon Capital Management was the company’s leading stakeholder in Q1.
In addition to famous dividend stocks like The Procter & Gamble Company (NYSE:PG), PepsiCo, Inc. (NASDAQ:PEP), and Johnson & Johnson (NYSE:JNJ), Realty Income Corporation (NYSE:O) is also favored by investors in this current market situation.
9. Leggett & Platt, Incorporated (NYSE:LEG)
Dividend Yield as of August 1: 4.52%
Leggett & Platt, Incorporated (NYSE:LEG) is a Missouri-based manufacturing company that specializes in finished products. In Q1 2022, the company reported $39 million in operating cash flow, while its free cash flow came in at $20.3 million. For Fy22, the company expects its operating cash flow to reach $600 million, with $230 million worth of expected dividend payments.
Leggett & Platt, Incorporated (NYSE:LEG) pays a quarterly dividend of $0.44 per share, raising it by 5% in May. The stock’s dividend yield came in at 4.52%, based on the close of August 1. The company maintains a 51-year track record of consistent dividend growth.
As per Insider Monkey’s database, 15 hedge funds held stakes in Leggett & Platt, Incorporated (NYSE:LEG) in Q1, down from 21 in the previous quarter. The combined value of these stakes is roughly $102 million.
8. Telephone and Data Systems, Inc. (NYSE:TDS)
Dividend Yield as of August 1: 4.57%
Telephone and Data Systems, Inc. (NYSE:TDS) is a telecommunication service company that provides wireless products and services. The company is based in Chicago.
In Q1 2022, Telephone and Data Systems, Inc. (NYSE:TDS) generated $381 million in operating cash flow, up from $240 million in the previous quarter. The company pays a quarterly dividend of $0.18 per share. Telephone and Data Systems, Inc. (NYSE:TDS) holds a 48-year track record of consistent dividend growth. As of August 1, the stock’s dividend yield came in at 4.57%.
The number of hedge funds owning stakes in Telephone and Data Systems, Inc. (NYSE:TDS) declined to 12 in Q1 2022 from 20 in the previous quarter, according to Insider Monkey’s data. The stakes owned by hedge funds are valued at nearly $53.4 million. GAMCO Investors owned over 1.7 million TDS shares, becoming the company’s largest stakeholder in Q1.
7. National Retail Properties, Inc. (NYSE:NNN)
Dividend Yield as of August 1: 4.63%
National Retail Properties, Inc. (NYSE:NNN) is a Florida-based real estate investment trust company that invests in properties that are subjected to long-term leases.
On July 15, National Retail Properties, Inc. (NYSE:NNN) declared a quarterly dividend of $0.55 per share, up 3.8% from its previous dividend. This marked the company’s 33rd consecutive year of dividend growth. The company ended Q1 2022 with cash and cash equivalents of $53.7 million and total assets worth over $7.7 billion. Its free cash flow came in at $164.3 million, up from $115.2 million in the previous quarter. The stock’s dividend yield stood at 4.63% on August 1.
Appreciating the company’s relationship-driven acquisition strategy, Credit Suisse initiated its coverage of National Retail Properties, Inc. (NYSE:NNN) in June, with an Outperform rating.
At the end of March 2022, 18 hedge funds tracked by Insider Monkey owned stakes in National Retail Properties, Inc. (NYSE:NNN), worth $92.5 million. In the previous quarter, 16 hedge funds held positions in the company, with stakes valued at $157.7 million. Millennium Management held the largest stake in the company in Q1, worth over $19.4 million.
6. International Business Machines Corporation (NYSE:IBM)
Dividend Yield as of August 1: 5.05%
International Business Machines Corporation (NYSE:IBM) generated over $2.1 billion in free cash flow in Q2 2022. The company’s operating cash flow came in at $1.32 billion. Moreover, it returned $1.5 billion to shareholders in dividends during the quarter.
International Business Machines Corporation (NYSE:IBM) has a solid dividend history, offering dividends to shareholders since 1916 while steadily boosting its payouts for the past 27 years. The company’s quarterly dividend stands at $1.65 per share, with a yield of 5.05%.
Following the company’s recent quarterly earnings, Credit Suisse set a $156 price target on International Business Machines Corporation (NYSE:IBM) in July while maintaining an Outperform rating on the shares.
International Business Machines Corporation (NYSE:IBM) was a part of 43 hedge fund portfolios in Q1 2022, down slightly from 44 a quarter earlier, according to Insider Monkey’s data. The stakes owned by hedge funds were collectively valued at nearly $1.2 billion.
Like The Procter & Gamble Company (NYSE:PG), PepsiCo, Inc. (NASDAQ:PEP), and Johnson & Johnson (NYSE:JNJ), International Business Machines Corporation (NYSE:IBM) is also one of the most reliable dividend candidates in 2022.
St. James Investment Company mentioned International Business Machines Corporation (NYSE:IBM) in its Q4 2021 investor letter. Here is what the firm had to say:
“IBM was not the first company to build computers. The distinction belongs to Sperry-Rand’s subsidiary UNIVAC, which introduced the first commercially successful computers in the early 1950s. In this era, IBM did possess the largest research and development department of the business machines industry and quickly caught up, introducing cost-competitive computers a few years after UNIVAC. By the late 1950s, IBM held the dominant market share in computers. IBM also touted a vastly superior sales organization, which used a sales tactic called “paper machines” (the equivalent of today’s “vaporware”). If a competitor’s product was selling well in a market segment that IBM had yet to penetrate, the company would announce a competing product and start taking orders for the “paper machine” long before it was available.
One cannot overstate how powerful IBM was in the computer industry in the 1950s and 1960s. Every competitor rightly worried that if their product worked too well for too long, it was only a matter of time before an army of IBM salesforce representatives mobilized. In their easily recognizable uniforms of starched white shirts, red ties and blue suits, IBM marketers marched on their customers and offered a more expensive, but much more defensible, choice. “Nobody gets fired for buying IBM” was a common phrase. Even competitors acknowledged that the company excelled at sales. As a UNIVAC executive once complained, ‘It doesn’t do much good to build a better mousetrap if the other guy selling mousetraps has five times as many salesmen.’” (Click here to see the full text)
5. Universal Health Realty Income Trust (NYSE:UHT)
Dividend Yield as of August 1: 5.32%
Universal Health Realty Income Trust (NYSE:UHT) is an American real estate investment trust that specializes in healthcare and human service-related facilities.
In the first half of 2022, Universal Health Realty Income Trust (NYSE:UHT) reported net cash from operating activities of $478 million, up from $119 million at the end of December 2021. The company had cash and cash equivalents of $132.6 million at the end of Q2, up from $115.3 million recorded at the end of 2021.
On June 9, Universal Health Realty Income Trust (NYSE:UHT) declared a 0.7% hike in its quarterly dividend to $0.71 per share. This was the company’s 37th consecutive year of dividend growth, the second longest dividend growth track record in the REIT sector. Its payout ratio currently stands at 36.1%. As of August 1, the stock’s dividend yield came in at 5.32%.
At the end of Q1 2022, 5 hedge funds tracked by Insider Monkey held investments in Universal Health Realty Income Trust (NYSE:UHT), worth nearly $20 million. In the previous quarter, 7 hedge funds owned stakes in the company with a total value of over $22 million. Renaissance Technologies was the company’s leading stakeholder at the end of March 2022.
4. Universal Corporation (NYSE:UVV)
Dividend Yield as of August 1: 5.65%
Universal Corporation (NYSE:UVV) specializes in leaf tobacco and operates through tobacco operations and ingredients operations.
Universal Corporation (NYSE:UVV) pays a quarterly dividend of $0.79 per share. The company has been raising its dividends consecutively for the past 52 years. In Q1 2022, the company generated over $83 million in free cash flow, up from $48 million in the previous quarter. Moreover, its operating cash flow came in at $96.4 million, compared with $69 million at the end of December 2021. Universal Corporation (NYSE:UVV) has a payout ratio of 89.6%. As of August 1, the stock’s dividend yield was recorded at 5.65%.
As per Insider Monkey’s Q1 2022 database, 10 hedge funds owned stakes in Universal Corporation (NYSE:UVV), up from 7 a quarter earlier. The stakes owned by these hedge funds have a value of $85.6 million.
3. Enbridge Inc. (NYSE:ENB)
Dividend Yield as of August 1: 6.04%
A Canada-based multinational pipeline company, Enbridge Inc. (NYSE:ENB) reported cash provided by operating activities of $2.5 billion in Q2 2022. The company’s distributable cash flow came in at $2.7 billion, up from $2.5 billion during the same period last year.
Enbridge Inc. (NYSE:ENB) has been a strong dividend-payer, offering dividends to shareholders for the past 67 years consecutively. The company also maintains a 27-year track record of consistent dividend growth. It pays a quarterly dividend of C$0.86 per share, with a yield of 6.04%, as of the close of August 1.
In June, National Bank lifted its price target on Enbridge Inc. (NYSE:ENB) to C$60 and kept an Outperform rating on the shares.
Rajiv Jain’s GQG Partners owned stakes worth over $2 billion in Enbridge Inc. (NYSE:ENB), becoming the company’s leading stakeholder in Q1. Overall, 24 hedge funds in Insider Monkey’s database had nearly $2.4 billion worth of investments in the Canada-based company.
ClearBridge Investments mentioned Enbridge Inc. (NYSE:ENB) in its Q3 2021 investor letter. Here is what the firm had to say:
“We are meaningfully overweight energy, particularly within North American energy infrastructure. Enbridge and Williams, our two infrastructure holdings, possess crown jewel infrastructure assets. They each deliver meaningful proportions of the overall energy produced and consumed in North America. Their revenues are backed by long-term contracts with high-quality counterparties and have little direct commodity price exposure. Their growth has been driven by the increasing production of North American energy. The advent of unconventional oil and gas production (oil sand and shale) has made North America a low-cost competitor on a global basis. We expect strong North American production to be an enduring feature of global energy supply for decades to come.”
2. Mercury General Corporation (NYSE:MCY)
Dividend Yield as of August 1: 6.17%
Mercury General Corporation (NYSE:MCY) is a California-based multiple-line insurance company that provides services to homeowners, renters, and other businesses.
At the end of Q1 2022, Mercury General Corporation (NYSE:MCY) reported cash of over $295.7 million, with total assets amounting to over $6.6 billion. During Q1, the company paid 56.5% of its net income in dividend payments, which shows that its dividends are safe for the upcoming years. Its free cash flow stood at over $98 million, compared with $61.6 million recorded at the end of December 2021.
Mercury General Corporation (NYSE:MCY) has been raising its dividends for the past 33 years. Its current quarterly payout stands at $0.635 per share, with a yield of 6.17%.
At the end of March 2022, 20 hedge funds in Insider Monkey’s database owned stakes in Mercury General Corporation (NYSE:MCY), up from 16 in the previous quarter. These stakes are collectively valued at $128.8 million.
1. Altria Group, Inc. (NYSE:MO)
Dividend Yield as of August 1: 8.21%
One of the world’s largest producers of tobacco products, Altria Group, Inc. (NYSE:MO) has raised its dividends 56 times in the past 52 years. The company’s quarterly earnings presented solid financial health, with over $3 billion in free cash flow in Q1, up from $2.6 billion in the previous quarter. Its operating cash flow also came in at over $3.07 billion. Altria Group, Inc. (NYSE:MO) pays a quarterly dividend of $0.90 per share, with a dividend yield of 8.21%, as of the close of August 1.
In July, Jefferies expressed concerns regarding slow demand for tobacco-related products in the US and set a $54 price target on Altria Group, Inc. (NYSE:MO) while maintaining a Buy rating on the shares.
Insider Monkey’s database shows that the hedge fund interest increased in Altria Group, Inc. (NYSE:MO) in Q1 2022, as 47 hedge funds owned stakes in the company, up from 39 in the previous quarter. The combined value of these stakes is nearly $2 billion. Ken Griffin, Jim Simons, and Rajiv Jain were the company’s most prominent stakeholders in Q1.
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Disclosure. None. 10 Best High-Yield Dividend Champions to Buy in August is originally published on Insider Monkey.
